Performance evaluation of series and parallel strategies for financial time series forecasting

Background:Improving financial time series forecasting is one of the most challenging and vital issues facing numerous financial analysts and decision makers.Given its direct impact on related decisions,various attempts have been made to achieve more accurate and reliable forecasting results,of which the combining of individual models remains a widely applied approach.In general,individual models are combined under two main strategies:series and parallel.While it has been proven that these strategies can improve overall forecasting accuracy,the literature on time series forecasting remains vague on the choice of an appropriate strategy to generate a more accurate hybrid model.Methods:Therefore,this study’s key aim is to evaluate the performance of series and parallel strategies to determine a more accurate one.Results:Accordingly,the predictive capabilities of five hybrid models are constructed on the basis of series and parallel strategies compared with each other and with their base models to forecast stock price.To do so,autoregressive integrated moving average(ARIMA)and multilayer perceptrons(MLPs)are used to construct two series hybrid models,ARIMA-MLP and MLP-ARIMA,and three parallel hybrid models,simple average,linear regression,and genetic algorithm models.Conclusion:The empirical forecasting results for two benchmark datasets,that is,the closing of the Shenzhen Integrated Index(SZII)and that of Standard and Poor’s 500(S&P 500),indicate that although all hybrid models perform better than at least one of their individual components,the series combination strategy produces more accurate hybrid models for financial time series forecasting.

Comprehensive review of text‑mining applications in finance

Text-mining technologies have substantially affected financial industries.As the data in every sector of finance have grown immensely,text mining has emerged as an important field of research in the domain of finance.Therefore,reviewing the recent literature on text-mining applications in finance can be useful for identifying areas for further research.This paper focuses on the text-mining literature related to financial forecasting,banking,and corporate finance.It also analyses the existing literature on text mining in financial applications and provides a summary of some recent studies.Finally,the paper briefly discusses various text-mining methods being applied in the financial domain,the challenges faced in these applications,and the future scope of text mining in finance.

A MULTISCALE MODELING APPROACH INCORPORATING ARIMA AND ANNS FOR FINANCIAL MARKET VOLATILITY FORECASTING

The financial market volatility forecasting is regarded as a challenging task because of irreg ularity, high fluctuation, and noise. In this study, a multiscale ensemble forecasting model is proposed. The original financial series are decomposed firstly different scale components （i.e., approximation and details） using the maximum overlap discrete wavelet transform （MODWT）. The approximation is pre- dicted by a hybrid forecasting model that combines autoregressive integrated moving average （ARIMA） with feedforward neural network （FNN）. ARIMA model is used to generate a linear forecast, and then FNN is developed as a tool for nonlinear pattern recognition to correct the estimation error in ARIMA forecast. Moreover, details are predicted by Elman neural networks. Three weekly exchange rates data are collected to establish and validate the forecasting model. Empirical results demonstrate consistent better performance of the proposed approach.

Extreme learning with chemical reaction optimization for stock volatility prediction

Extreme learning machine(ELM)allows for fast learning and better generalization performance than conventional gradient-based learning.However,the possible inclusion of non-optimal weight and bias due to random selection and the need for more hidden neurons adversely influence network usability.Further,choosing the optimal number of hidden nodes for a network usually requires intensive human intervention,which may lead to an ill-conditioned situation.In this context,chemical reaction optimization(CRO)is a meta-heuristic paradigm with increased success in a large number of application areas.It is characterized by faster convergence capability and requires fewer tunable parameters.This study develops a learning framework combining the advantages of ELM and CRO,called extreme learning with chemical reaction optimization(ELCRO).ELCRO simultaneously optimizes the weight and bias vector and number of hidden neurons of a single layer feed-forward neural network without compromising prediction accuracy.We evaluate its performance by predicting the daily volatility and closing prices of BSE indices.Additionally,its performance is compared with three other similarly developed models—ELM based on particle swarm optimization,genetic algorithm,and gradient descent—and find the performance of the proposed algorithm superior.Wilcoxon signed-rank and Diebold–Mariano tests are then conducted to verify the statistical significance of the proposed model.Hence,this model can be used as a promising tool for financial forecasting.

A chemical-reaction-optimization-based neuro-fuzzy hybrid network for stock closing price prediction

Accurate prediction of stock market behavior is a challenging issue for financial forecasting.Artificial neural networks,such as multilayer perceptron have been established as better approximation and classification models for this domain.This study proposes a chemical reaction optimization(CRO)based neuro-fuzzy network model for prediction of stock indices.The input vectors to the model are fuzzified by applying a Gaussian membership function,and each input is associated with a degree of membership to different classes.A multilayer perceptron with one hidden layer is used as the base model and CRO is used to the optimal weights and biases of this model.CRO was chosen because it requires fewer control parameters and has a faster convergence rate.Five statistical parameters are used to evaluate the performance of the model,and the model is validated by forecasting the daily closing indices for five major stock markets.The performance of the proposed model is compared with four state-of-art models that are trained similarly and was found to be superior.We conducted the Deibold-Mariano test to check the statistical significance of the proposed model,and it was found to be significant.This model can be used as a promising tool for financial forecasting.