Forecasting the changes in daily stock prices in Shanghai Stock Exchange using Neural Network and Ordinary Least Squares Regression

  • 459 Views
  • 40 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

The research focuses on finding a superior forecasting technique to predict stock movement and behavior in the Shanghai Stock Exchange. The author’s interest is in stock market activities during high volatility, specifically 13 years from 2002 to 2015. This volatile period, fueled by events such as the dot-com bubble, SARS outbreak, political leadership transitions, and the global financial crisis, is of interest. The study aims to analyze changes in stock prices during an unstable period. The author used advanced computer sciences, Machine Learning through information processing and training, and the traditional statistical approach, the Multiple Linear Regression Model, with the least square method. Both techniques are accurate predictors measured by Absolute Percent Error with a range of 1.50% to 1.65%, using a data file containing 3,283 observations generated to record the daily close prices of individual Chinese companies. The t-test paired difference experiment shows the superiority of Neural Network in the finance sector and potentially not in other sectors. The Multiple Linear Regression Model performs equivalent to the Neural Network in other sectors.

view full abstract hide full abstract
    • Table 1. List of terms and abbreviations
    • Table 2. Industry-wide summary for APE (Absolute Percent Error) for daily stock price change and p-value of t-test for paired differences
    • Table 3. Summary for APE (Absolute Percent Error) for daily stock price change across eight industrial sectors
    • Table A1. Summary tables of analysis by industries and by individual companies from A-share of the Shanghai Stock Exchange
    • Conceptualization
      Sunantha Prime
    • Formal Analysis
      Sunantha Prime
    • Methodology
      Sunantha Prime
    • Validation
      Sunantha Prime
    • Writing – original draft
      Sunantha Prime
    • Writing – review & editing
      Sunantha Prime