TY - EJOU
AU - Bastos, Edson Vinicius Pontes
AU - Antunes, Jorge Junio Moreira
AU - Marujo, Lino Guimarães
AU - Wanke, Peter Fernandes
AU - Filho, Roberto Ivo da Rocha Lima
TI - An Endogenous Feedback and Entropy Analysis in Machine Learning Model for Stock’s Return Forecast
T2 - Intelligent Automation \& Soft Computing
PY - 2023
VL - 36
IS - 3
SN - 2326-005X
AB - Stock markets exhibit Brownian movement with random, non-linear, uncertain, evolutionary, non-parametric, nebulous, chaotic characteristics and dynamism with a high degree of complexity. Developing an algorithm to predict returns for decision-making is a challenging goal. In addition, the choice of variables that will serve as input to the model represents a non-triviality, since it is possible to observe endogeneity problems between the predictor and the predicted variables. Thus, the goal is to analyze the endogenous origin of the stock return prediction model based on technical indicators. For this, we structure a feed-forward neural network. We evaluate the endogenous feedback between the predicted returns and technical analysis indicators based on the generated residues. It is possible to predict the return. The high accuracy of the model indicates that, during the test period, there is a hit rate close to 76%. Regarding endogeneity, the term of interest and the return are the variables that influence the largest number of indicators. The results will help investors build investment strategies based on this expert system applied to forecasting.
KW - Forecast; endogeneity; neural networks; differential evolution; stochastic optimization
DO - 10.32604/iasc.2023.034582