We propose a survey of soft computing techniques applied to financial market.We surveyed several primary studies proposed in the literature.A framework for building an intelligent trading system was proposed.Future directions of this research field are discussed. Financial markets play an important role on the economical and social organization of modern society. In these kinds of markets, information is an invaluable asset. However, with the modernization of the financial transactions and the information systems, the large amount of information available for a trader can make prohibitive the analysis of a financial asset. In the last decades, many researchers have attempted to develop computational intelligent methods and algorithms to support the decision-making in different financial market segments. In the literature, there is a huge number of scientific papers that investigate the use of computational intelligence techniques to solve financial market problems. However, only few studies have focused on review the literature of this topic. Most of the existing review articles have a limited scope, either by focusing on a specific financial market application or by focusing on a family of machine learning algorithms. This paper presents a review of the application of several computational intelligent methods in several financial applications. This paper gives an overview of the most important primary studies published from 2009 to 2015, which cover techniques for preprocessing and clustering of financial data, for forecasting future market movements, for mining financial text information, among others. The main contributions of this paper are: (i) a comprehensive review of the literature of this field, (ii) the definition of a systematic procedure for guiding the task of building an intelligent trading system and (iii) a discussion about the main challenges and open problems in this scientific field.

Computational Intelligence and Financial Markets

Up-to-date report on the accuracy and efficiency of state-of-the-art classifiers.We compare the accuracy of 11 classification algorithms pairwise and groupwise.We examine separately the training, parameter-tuning, and testing time.GBDT and Random Forests yield highest accuracy, outperforming SVM.GBDT is the fastest in testing, Naive Bayes the fastest in training. Current benchmark reports of classification algorithms generally concern common classifiers and their variants but do not include many algorithms that have been introduced in recent years. Moreover, important properties such as the dependency on number of classes and features and CPU running time are typically not examined. In this paper, we carry out a comparative empirical study on both established classifiers and more recently proposed ones on 71 data sets originating from different domains, publicly available at UCI and KEEL repositories. The list of 11 algorithms studied includes Extreme Learning Machine (ELM), Sparse Representation based Classification (SRC), and Deep Learning (DL), which have not been thoroughly investigated in existing comparative studies. It is found that Stochastic Gradient Boosting Trees (GBDT) matches or exceeds the prediction performance of Support Vector Machines (SVM) and Random Forests (RF), while being the fastest algorithm in terms of prediction efficiency. ELM also yields good accuracy results, ranking in the top-5, alongside GBDT, RF, SVM, and C4.5 but this performance varies widely across all data sets. Unsurprisingly, top accuracy performers have average or slow training time efficiency. DL is the worst performer in terms of accuracy but second fastest in prediction efficiency. SRC shows good accuracy performance but it is the slowest classifier in both training and testing.

An up-to-date comparison of state-of-the-art classification algorithms

Feature extraction from financial data is one of the most important problems in market prediction domain for which many approaches have been suggested. Among other modern tools, convolutional neural networks (CNN) have recently been applied for automatic feature selection and market prediction. However, in experiments reported so far, less attention has been paid to the correlation among different markets as a possible source of information for extracting features. In this paper, we suggest a CNN-based framework, that can be applied on a collection of data from a variety of sources, including different markets, in order to extract features for predicting the future of those markets. The suggested framework has been applied for predicting the next day’s direction of movement for the indices of S&P 500, NASDAQ, DJI, NYSE, and RUSSELL based on various sets of initial variables. The evaluations show a significant improvement in prediction’s performance compared to the state of the art baseline algorithms.

CNNpred: CNN-based stock market prediction using a diverse set of variables

The search for models to predict the prices of financial markets is still a highly researched topic, despite major related challenges. The prices of financial assets are non-linear, dynamic, and chaotic; thus, they are financial time series that are difficult to predict. Among the latest techniques, machine learning models are some of the most researched, given their capabilities for recognizing complex patterns in various applications. With the high productivity in the machine learning area applied to the prediction of financial market prices, objective methods are required for a consistent analysis of the most relevant bibliography on the subject. This article proposes the use of bibliographic survey techniques that highlight the most important texts for an area of research. Specifically, these techniques are applied to the literature about machine learning for predicting financial market values, resulting in a bibliographical review of the most important studies about this topic. Fifty-seven texts were reviewed, and a classification was proposed for markets, assets, methods, and variables. Among the main results, of particular note is the greater number of studies that use data from the North American market. The most commonly used models for prediction involve support vector machines (SVMs) and neural networks. It was concluded that the research theme is still relevant and that the use of data from developing markets is a research opportunity.

Literature review: Machine learning techniques applied to financial market prediction

This paper aims to develop an innovative neural network approach to achieve better stock market predictions. Data were obtained from the live stock market for real-time and off-line analysis and results of visualizations and analytics to demonstrate Internet of Multimedia of Things for stock analysis. To study the influence of market characteristics on stock prices, traditional neural network algorithms may incorrectly predict the stock market, since the initial weight of the random selection problem can be easily prone to incorrect predictions. Based on the development of word vector in deep learning, we demonstrate the concept of “stock vector.” The input is no longer a single index or single stock index, but multi-stock high-dimensional historical data. We propose the deep long short-term memory neural network (LSTM) with embedded layer and the long short-term memory neural network with automatic encoder to predict the stock market. In these two models, we use the embedded layer and the automatic encoder, respectively, to vectorize the data, in a bid to forecast the stock via long short-term memory neural network. The experimental results show that the deep LSTM with embedded layer is better. Specifically, the accuracy of two models is 57.2 and 56.9%, respectively, for the Shanghai A-shares composite index. Furthermore, they are 52.4 and 52.5%, respectively, for individual stocks. We demonstrate research contributions in IMMT for neural network-based financial analysis.

An innovative neural network approach for stock market prediction

We predict long term stock price direction.We benchmark three ensemble methods against four single classifiers.We use five times twofold cross-validation and AUC as a performance measure.Random Forest is the top algorithm.This study is the first to make such an extensive benchmark in this domain. Stock price direction prediction is an important issue in the financial world. Even small improvements in predictive performance can be very profitable. The purpose of this paper is to benchmark ensemble methods (Random Forest, AdaBoost and Kernel Factory) against single classifier models (Neural Networks, Logistic Regression, Support Vector Machines and K-Nearest Neighbor). We gathered data from 5767 publicly listed European companies and used the area under the receiver operating characteristic curve (AUC) as a performance measure. Our predictions are one year ahead. The results indicate that Random Forest is the top algorithm followed by Support Vector Machines, Kernel Factory, AdaBoost, Neural Networks, K-Nearest Neighbors and Logistic Regression. This study contributes to literature in that it is, to the best of our knowledge, the first to make such an extensive benchmark. The results clearly suggest that novel studies in the domain of stock price direction prediction should include ensembles in their sets of algorithms. Our extensive literature review evidently indicates that this is currently not the case.

Nathalie Hespeels

Papers

Evaluating multiple classifiers for stock price direction prediction