Analysis and Prediction of Stock Price using HMM and Facebook’s Prophet Computational Models

Abstract

In recent times, the utilization of Statistical and Machine Learning techniques has gained prominence in the realm of financial data analysis. These methods are applied to various types of financial data, encompassing textual information, numerical data, and graphical representations. This study aims to compare the performance of two prominent forecasting methods, Hidden Markov Models and Facebook’s Prophet in the context of stock price prediction. Assessing the predictive accuracy, interpretability, and adaptability of both approaches through empirical experiments and case studies sheds light on their respective advantages and limitations. These experiments demonstrate that the predicted stock prices are in closer proximity to the actual price when compared to using a single data source. Furthermore, the achieved MAPE are 0.01, 0.025 and respectively, outperforming conventional methodologies. Our validation of effectiveness extends to real-world datasets encompassing the NIFTY50 Index. These findings offer valuable insights for researchers and practitioners seeking effective strategies for stock price prediction.