ResNLS: An Improved Model for Stock Price Forecasting

Stock prices forecasting has always been a challenging task. Although many research projects adopt machine learning and deep learning algorithms to address the problem, few of them pay attention to the varying degrees of dependencies between stock prices. In this paper we introduce a hybrid model that improves stock price prediction by emphasizing the dependencies between adjacent stock prices. The proposed model, ResNLS, is mainly composed of two neural architectures, ResNet and LSTM. ResNet serves as a feature extractor to identify dependencies between stock prices across time windows, while LSTM analyses the initial time-series data with the combination of dependencies which considered as residuals. In predicting the SSE Composite Index, our experiment reveals that when the closing price data for the previous 5 consecutive trading days is used as the input, the performance of the model (<PRE_TAG>ResNLS-5</POST_TAG>) is optimal compared to those with other inputs. Furthermore, <PRE_TAG>ResNLS-5</POST_TAG> outperforms vanilla CNN, RNN, LSTM, and Bi<PRE_TAG>LSTM</POST_TAG> models in terms of prediction accuracy. It also demonstrates at least a 20% improvement over the current state-of-the-art baselines. To verify whether <PRE_TAG>ResNLS-5</POST_TAG> can help clients effectively avoid risks and earn profits in the stock market, we construct a quantitative trading framework for back testing. The experimental results show that the trading strategy based on predictions from <PRE_TAG>ResNLS-5</POST_TAG> can successfully mitigate losses during declining stock prices and generate profits in the periods of rising stock prices.