Abstract
This study attempts to integrate the decision tree algorithm with the Apriori algorithm to explore the relationship among financial ratio, corporate governance, and stock returns to establish a stock investment decision model. The sports and leisure related industries are employed as the research target. The data are collected and processed for generating decision tree and association rules. Based on the analysis outcome, an investment decision model is constructed for investors expecting to decrease their investment risks and further increase their profits. This stock investment decision model is one type of multiple-criteria decision-making model. This study makes three critical contributions to investors. (1) It proposes a systematical model of exploring related data through the decision tree algorithm and the Apriori algorithm to reveal the implicit investment knowledge. (2) An effective investment decision model is established and expected to provide a reference basis during stock-picking decisions. (3) The investment decision model is enhanced with implicit rules found among variables using association rules.
Highlights
In recent years, scholars have conducted a lot of research on stock prices or the rate of return
Technical analysis is to believe that history will repeat itself and stock prices will follow specific trends shifting to the equilibrium point [1,2]
Interpreting the decision tree model generated by the C4.5 algorithm and the association rules created by the Apriori algorithm, if any rule that is generated by the individual algorithm; it means that the value of the each rule is high
Summary
Scholars have conducted a lot of research on stock prices or the rate of return. It can be divided into two categories, namely fundamental analysis and technical analysis. Fundamental analysis is to inspect a company’s finances, internal operations, industrial market conditions, domestic and foreign political and economic situations, etc., including a company’s financial statements and non-financial information, as long as you can find the embedded value of the stock, which can predict the stock price rise or fall. Technical analysis is to believe that history will repeat itself and stock prices will follow specific trends shifting to the equilibrium point [1,2]. This study tries to explore the relationship between corporate governance (presented by financial ratios) and stock price [3,4,5]
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