Non-fixed and Asymmetrical Margin Approach to Stock Market Prediction using Support Vector Regressio...
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Non-fixed and Asymmetrical Margin Approach to Stock Market Prediction using Support Vector Regression. Haiqin Yang, Irwin King and Laiwan Chan Department of Computer Science and Engineering The Chinese University of Hong Kong November 18-22, 2002 ICONIP ’ 02. Index. Motivation.

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Haiqin yang irwin king and laiwan chan department of computer science and engineering

Non-fixed and Asymmetrical Margin Approach to Stock Market Prediction using Support Vector Regression

Haiqin Yang, Irwin King and Laiwan Chan

Department of Computer Science and Engineering

The Chinese University of Hong Kong

November 18-22, 2002

ICONIP’02


Index

Index

  • Motivation

  • SVR Introduction

  • Approach

  • Experiments & Results

  • Conclusion


Motivation

Motivation

  • Predictive accuracy only?

  • Downside risk!

  • Two characteristics: fixed and symmetrical

  • Combine them:

    Non-fixed and Asymmetrical margin


Support vector regreesion svr introduction

Support Vector Regreesion (SVR) introduction

  • Developed by Vapnik (1995)

  • Model:

train data:

estimate objective function:

minimize


Svr introduction cont d

SVR Introduction (Cont’d)

  • Loss function:

  • The objective function f is represented by the dotted points.


Related applications

Related Applications

  • Support Vector Method for Function Approximation, Regression Estimation and Signal Processing (Vapnik et al., 1996)

  • Predicting time series with support vector machine (Muller et al., 1997)

  • Application of support vector machines to financial time series forecasting (E.H.Tay and L.J.Cao. 2001)


Approach

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Approach

  • Two characteristics:

  • 4 kinds of margins

fixed,

symmetrical.

FASM

FAAM

NASM

NAAM


Previous setting

Previous setting

  • Previous others’ method

  • In our previous work:Support Vector Machines Regression for volatile stock market prediction (IDEAL’02)


New approach

New Approach

  • Two characteristics of the margin in

    – insensitive loss function: fixed and symmetrical.

Symmetrical

Asymmetrical

Fixed

Non-fixed


Formulas

Formulas

  • A general type of –Insensitive loss function

  • Fixed and Symmetrical Margin (FASM):

  • Fixed and Asymmetrical Margin (FAAM):

  • Non-fixed and Symmetrical Margin (NASM):

  • Non-fixed and Asymmetrical Margin (NAAM):

up margin

down margin


Formulas1

Formulas

  • QP problem:

    s.t.

  • Objective function:

  • Kernel function:

    e.g. RBF


How to set margin

Margin width:

Up margin:

Down margin:

How to set margin?


Experiment

Experiment

  • Accuracy Metrics

    • MAE:

    • UMAE:

    • DMAE:

    • actual value,

    • predictive value

    • number of testing data

Total error

Upside risk

Downside risk


Experiment description

Experiment Description

  • Model:

  • Data: Hang Seng Index (HSI),

    Dow Jones Industrial Average (DJIA).

  • Time periods: Jan. 2, 1998 ~ Dec. 29, 2000(3 years)

  • Ratio of training data and testing data: 5:1.

  • Procedures: one day ahead prediction.

  • Environments

    • CPU: Pentium 4, 1.4 G

    • Memory: RAM 512M

    • OS: Windows2000

    • Time: few hours.


Experiment description1

Experiment Description

  • Three kinds of experiments

    • Test the effect of parameters in NAAM to obtain a better result.

    • Compare the result of NAAM with NASM, AR(4), RBF network (also test the effect of the number of hidden units).

    • Compare the results of NAAM, NASM with FASM and FAAM.


Actual parameter setting

Actual Parameter Setting


Effect of length of ema in naam

Effect of Length of EMA in NAAM

  • HSI

  • DJIA

Error

Error


Graphes

Graphes

  • HSI

  • DJIA


Effect of in naam

Effect of in NAAM

  • HSI

  • DJIA

Error

Error


Effect of k in naam

Effect of k in NAAM

  • HSI

  • DJIA

Error

Error


Comparison results

Comparison Results

  • HSI

Error


Results

Results

  • DJIA

Error


Naam nasm vs fasm faam

NAAM, NASM vs. FASM, FAAM

  • Fixed Margin:

  • HSI

Step:

Error


Naam nasm vs fasm faam1

NAAM, NASM vs. FASM, FAAM

  • Fixed Margin:

  • DJIA

Step:

Error


Conclusion

Conclusion

  • Propose non-fixed and asymmetrical margin (NAAM) approach in SVR to predict stock market.

  • Compare this method to non-fixed symmetrical margin (NASM) approach, AR(4), RBF network.

  • NAAM, NASM outperform AR(4), RBF network.

  • NAAM can reduce the downside risk.

  • NAAM, NASM outperform FASM, FAAM.


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