Can Ensemble Machine Learning Methods Predict Stock Returns for Indian Banks Using Technical Indicators?
Journal of Risk and Financial Management
; 15(8):350, 2022.
Article
in English
| ProQuest Central | ID: covidwho-2023845
ABSTRACT
This paper develops ensemble machine learning models (XGBoost, Gradient Boosting, and AdaBoost in addition to Random Forest) for predicting stock returns of Indian banks using technical indicators. These indicators are based on three broad categories of technical analysis:
Price, Volume, and Turnover. Various error metrics like Mean Absolute Error (MAE), Mean Squared Error (MSE), Mean Absolute Percentage Error (MAPE), Root-Mean-Squared-Error (RMSE) have been used to check the performance of the models. Results show that the XGBoost algorithm performs best among the four ensemble models. The mean of absolute error and the root-mean-square -error vary around 3–5%. The feature importance plots generated by the models depict the importance of the variables in predicting the output. The proposed machine learning models help traders, investors, as well as portfolio managers, better predict the stock market trends and, in turn, the returns, particularly in banking stocks minimizing their sole dependency on macroeconomic factors. The techniques further assist the market participants in pre-empting any price-volume action across stocks irrespective of their size, liquidity, or past turnover. Finally, the techniques are incredibly robust and display a strong capability in predicting trend forecasts, particularly with any large deviations.
Business And Economics; ensemble techniques; machine learning; stock prediction; Indian banks; Stock exchanges; Efficient markets; Investments; Securities markets; Neural networks; Small & medium sized enterprises-SME; Gross Domestic Product--GDP; Econometrics; Consumer Price Index; Risk premiums; Economic growth; Coronaviruses; Banking; COVID-19; India
Full text:
Available
Collection:
Databases of international organizations
Database:
ProQuest Central
Type of study:
Prognostic study
Language:
English
Journal:
Journal of Risk and Financial Management
Year:
2022
Document Type:
Article
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