Hidden Markov Models for Stock Market Prediction
Fuente:
arXiv
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| Autores principales: | , , , |
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| Formato: | Preprint |
| Publicado: |
2023
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| Acceso en línea: | |
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| _version_ | 1866914175108775936 |
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| author | Catello, Luigi Ruggiero, Ludovica Schiavone, Lucia Valentino, Mario |
| author_facet | Catello, Luigi Ruggiero, Ludovica Schiavone, Lucia Valentino, Mario |
| contents | The stock market presents a challenging environment for accurately predicting future stock prices due to its intricate and ever-changing nature. However, the utilization of advanced methodologies can significantly enhance the precision of stock price predictions. One such method is Hidden Markov Models (HMMs). HMMs are statistical models that can be used to model the behavior of a partially observable system, making them suitable for modeling stock prices based on historical data. Accurate stock price predictions can help traders make better investment decisions, leading to increased profits. In this article, we trained and tested a Hidden Markov Model for the purpose of predicting a stock closing price based on its opening price and the preceding day's prices. The model's performance has been evaluated using two indicators: Mean Average Prediction Error (MAPE), which specifies the average accuracy of our model, and Directional Prediction Accuracy (DPA), a newly introduced indicator that accounts for the number of fractional change predictions that are correct in sign. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2310_03775 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | Hidden Markov Models for Stock Market Prediction Catello, Luigi Ruggiero, Ludovica Schiavone, Lucia Valentino, Mario Systems and Control The stock market presents a challenging environment for accurately predicting future stock prices due to its intricate and ever-changing nature. However, the utilization of advanced methodologies can significantly enhance the precision of stock price predictions. One such method is Hidden Markov Models (HMMs). HMMs are statistical models that can be used to model the behavior of a partially observable system, making them suitable for modeling stock prices based on historical data. Accurate stock price predictions can help traders make better investment decisions, leading to increased profits. In this article, we trained and tested a Hidden Markov Model for the purpose of predicting a stock closing price based on its opening price and the preceding day's prices. The model's performance has been evaluated using two indicators: Mean Average Prediction Error (MAPE), which specifies the average accuracy of our model, and Directional Prediction Accuracy (DPA), a newly introduced indicator that accounts for the number of fractional change predictions that are correct in sign. |
| title | Hidden Markov Models for Stock Market Prediction |
| topic | Systems and Control |
| url | https://arxiv.org/abs/2310.03775 |