Time series prediction using machine learning: a case of Bitcoin returns

ABSTRACT

Purpose>The purpose of this study is to compare five data-driven-based ML techniques to predict the time series data of Bitcoin returns, namely, alternating model tree, random forest (RF), multiple linear regression, multi-layer perceptron regression and M5 Tree algorithms.Design/methodology/approach>The data used to forecast time series data of Bitcoin returns ranges from 8 July 2010 to 30 Aug 2020. This study used several predictors to predict bitcoin returns including economic policy uncertainty, equity market volatility index, S&P returns, USD/EURO exchange rates, oil and gold prices, volatilities and returns. Five statistical indexes, namely, correlation coefficient, mean absolute error, root mean square error, relative absolute error and root relative squared error are determined. The results of these metrices are used to develop colour intensity ranking.Findings>Among the machine learning (ML) techniques used in this study, RF models has shown superior predictive ability for estimating the Bitcoin returns.Originality/value>This study is first of its kind to use and compare ML models in the prediction of Bitcoins. More studies can be carried out by using further cryptocurrencies and other ML data-driven models in future.