Abstract
Since the creation of stock markets, there have been attempts to predict their movements, and new prediction methodologies have been devised. According to a recent study, when the Russell 2000 industry index starts to rise, stocks belonging to the corresponding industry in other countries also rise accordingly. Based on this empirical result, this study seeks to predict the start date of industry uptrends using the Russell 2000 industry index. The proposed model in this study predicts future stock prices using a denoising autoencoder (DAE) long short-term memory (LSTM) model and predicts the existence and timing of future change points in stock prices through Pettitt’s test. The results of the empirical analysis confirmed that this proposed model can find the change points in stock prices within 7 days prior to the start date of actual uptrends in selected industries. This study contributes to predicting a change point through a combination of statistical and deep learning models, and the methodology developed in this study could be applied to various financial time series data for various purposes.
Highlights
A recent study demonstrated that compared with other machine learning algorithms including multiple linear regression (MLR), support vector regression (SVR), artificial neural network (ANN) and long short-term memory (LSTM), the proposed denoising autoencoder (DAE)-LSTM model achieves the best prediction accuracy [20]
This study examines four sectors including consumer discretionary, consumer staples, information technology (IT), and health care included in the Russell 2000 index
Pettitt’s test, a points that will appear in the future using the Russell industry index
Summary
Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. Sustainability 2021, 13, 11822 is only a single digit share of the market caps of all stocks on the New York Stock Ex2 of 15 change. In this light, the Russell 2000 stocks include many small-scale companies with high growth potential. Unlike the Nasdaq 100 Index, which contains large technology stocks of the top 100 companies by market capitalization, the Russell 2000 Index includes top. Pettitt’s test is performed based on the predicted closing prices to detect the change points. No research to date has attempted to predict future stock price change points. This study to date has attempted to predict future stock price change points.
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