Journal of AppliedMath 2023; 1(2): 134.

Review Article

Machine learning-based approaches for financial market prediction:

A comprehensive review
Bhaskar Nandi1, Subrata Jana2,*, Krishna Pada Das3
1
Department of Computer Science, Seacom Engineering College, Howrah 711302, West Bengal, India
2
Jadavpur University, Kolkata 700032, West Bengal, India
3
Department of Mathematics, Mahadevananda Mahavidyalaya, Barracpore 700120, Kolkata, West Bengal, India
* Corresponding author: Subrata Jana, [email protected]

ARTICLE INFO ABSTRACT: This research paper investigates the use of machine
learning techniques in financial markets. The paper provides a
Received: 20 July 2023
Accepted: 25 July 2023 comprehensive literature review of recent research on machine learning
Available online: 28 August 2023 applications in finance, including stock price prediction, financial time
doi: 10.59400/jam.v1i2.134 series forecasting, and portfolio optimization. Various machine learning
techniques, such as regression analysis, decision trees, support vector
Copyright © 2023 Author(s).
machines, and deep learning, are discussed in detail, with a focus on
Journal of AppliedMath is published by their strengths, weaknesses, and potential applications. The paper also
Academic Publishing Pte. Ltd. This article
is licensed underthe Creative Commons highlights the challenges associated with machine learning in finance,
Attribution License (CC BY 4.0). such as data quality, model interpretability, and ethical considerations.
http://creativecommons.org/licenses/by/4
.0/ Overall, the paper demonstrates that machine learning has significant
potential in finance but calls for further research to address these
challenges and fully explore its potential in financial markets.

KEYWORDS: financial markets; literature survey; research paper;

machine learning; deep learning

1. Introduction
Financial markets are complex systems that involve the exchange of assets, such as stocks, bonds,
and commodities, among buyers and sellers. The behavior of financial markets is influenced by a
multitude of factors, such as economic indicators, political events, investor sentiment, and company
news. The ability to predict and understand the behavior of financial markets is crucial for investors,
traders, and policymakers alike.
In recent years, the use of machine learning (ML) in finance has gained significant attention due to
its potential to extract insights from vast amounts of data and provide accurate predictions. ML
techniques can be used to analyze financial data, identify patterns and trends, and make predictions
based on historical data.
The use of ML in financial markets has numerous applications, including stock price prediction,
fraud detection, risk management, and portfolio optimization. Additionally, ML has the potential to
identify previously unknown market inefficiencies and opportunities, enabling investors to gain a
competitive edge.
Despite the promise of ML in finance, the use of these techniques also poses significant challenges.
These include issues related to data quality, overfitting, interpretability, and ethical considerations.
Therefore, understanding the strengths and limitations of ML techniques in financial markets is crucial
for ensuring their effective and responsible use.

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This research paper aims to provide an overview of the current state of the art in using ML
techniques in financial markets. The paper will explore the various applications of ML in finance,
examine the challenges associated with these techniques, and provide recommendations for future
research.

2. Literature survey
Strategies for improving an existing machine learning tool, C4.5, to handle concept drift and non-
determinism in a time series domain were explored by Harries and Horn[1]. For the most part, human
endeavors are plagued by the challenge of trying to foresee the future. Even though there are a variety
of specialized time series projection methods available, they all have their drawbacks. In addition to
being difficult to comprehend even for subject specialists, most methods are limited to modeling
complete sequences rather than allowing users to derive predictive characteristics. In theory, symbolic
machine learning could overcome these restrictions. The application of symbolic machine learning to a
wide variety of difficult issues has proven highly effective. Unfortunately, there haven’t been many
efforts to explicitly apply symbolic machine learning to time series projection. As a consequence,
current systems are unable to deal with evolving target ideas or clearly depict instances in a time-
ordered fashion. Due to its temporal ordering, its target ideas’ dynamic nature, and its high degree of
non-determinism, financial projection is a difficult target domain. Many experts believe the financial
markets to be uncertain, so the prospect of finding a method that is more reliable than random chance is
appealing. The purpose of this research is to show that machine learning can be used to generate helpful
financial forecasting techniques. The minimum usable success rate, in the eyes of subject specialists, for
short-term financial prediction is 60%. Our findings suggest that with the right set of tools, machine
learning can achieve even better outcomes than this. We reduced the impact of both noise and idea shift
by compromising coverage for precision. Australian Gilt Securities Limited collaborated on and
financed the described study. In this case, an Australian Postgraduate Award helped Michael Harries
pursue his studies (Industrial).
Support vector machines (SVMs) were compared to a multi-layer perceptron trained with the back
propagation (BP) algorithm in a study by Cao and Tay[2]. The parameters of normalized mean square
error (NMSE), mean absolute error (MAE), directional symmetry (DS), correct up (CP) trend, and
correct down (CD) trend all indicate that SVMs provide more accurate predictions than BP. The data
collection is the monthly closing prices for the S&P 500. Due to the lack of a systematic method for
selecting the SVM’s free parameters, this exercise examines the generalization error with regard to the
SVM’s free parameters. This is demonstrated experimentally, where their effect on the answer is shown
to be negligible. The benefits of using SVMs for finance time series forecasting are highlighted by the
analysis of the experimental findings.
Kim[3] used support vector machines (SVMs) are promising methods for the prediction of financial
time-series because they use a risk function consisting of the empirical error and a regularized term
which is derived from the structural risk minimization principle. In order to forecast the stock market
indicator, SVM is used in this research. Further, by contrasting SVM with back-propagation neural
networks and case-based reasoning, this research looks at the viability of using SVM in financial
predictions. It is clear from the experiments that SVM is a viable option to traditional methods of stock
market forecasting.
In 2005, Huang et al.[4] submitted the capacity control of the decision function, the use of kernel
functions, and a sparse solution are what set support vector machines (SVMs) apart from other learning

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algorithms. In this study, we use SVM to anticipate the weekly direction of the NIKKEI 225 index’s
movement in order to explore the predictability of financial movement direction. We compare SVM’s
predicting abilities to those of LDA, QDA, and Elman Backpropagation Neural Networks. The
experimental outcomes favor SVM over competing categorization strategies. In addition, we suggest a
merging model in which SVM is combined with the other categorization techniques. Out of all the
available predicting techniques, the merging model is the most effective.
Predictions for the National Stock Exchange’s S&P CNX NIFTY market index were analyzed by
Kumar and Thenmozhi[5]. The NSX is one of the most rapidly expanding stock exchanges in
developing Asian countries. Unique machine learning approaches, such as the random forest and
support vector machines (SVM), show promise in the forecasting of economic time series. Linear
discriminant analysis, logit, artificial neural network, random forest, and support vector machine are
some of the categorization models used to make directional predictions that have been put to the test.
In this research, empirical evidence indicates that the SVM is superior to the other classification
methods for predicting the direction of stock market movement, while the random forest method is
superior to the neural network, discriminant analysis, and logit model.
Stock and index price direction accurately predicted by Ou and Wang [6] is critical for market
dealers or investors to maximize profits. Data mining techniques have been successfully shown to
generate high forecasting accuracy of stock price movement. Traders can no longer rely on a single
method of predicting the future of the markets; instead, they must employ a variety of forecasting
methods to obtain multiple indications and more information. Ten data mining methods are presented
and used to forecast the performance of the Hang Seng indicator on the Hong Kong stock exchange.
Methods such as Nave Bayes based on kernel estimation, Logit model, Tree based classification, neural
network, Bayesian classification with Gaussian process, Support vector machine (SVM), and Least
squares support vector machine are among those used. (LS-SVM). Based on the experimental findings,
the SVM and LS-SVM produce the best predictive scores. In particular, SVM outperforms LS-SVM in
terms of hit rate and error rate parameters for in-sample prediction, while LS-SVM outperforms SVM
for out-of-sample predictions.
The use of BFO (Bacterial Foraging Optimization) and ABFO (Adaptive Bacterial Foraging
Optimization) techniques was first introduced by Majhi et al.[7] to create an effective forecasting model
for predicting different stock indices. These predicting models employ a straightforward linear combiner
structure. As a result, ABFO and BFO are used to improve the linking weights of the models based on
the adaptive linear combiner in order to produce the lowest possible mean square error (MSE).
Comparisons are made between the findings obtained by these models and those obtained by the
genetic algorithm (GA) and particle swarm optimization (PSO) based models when evaluating their
short- and long-term forecast performance with test data. In comparison to other evolutionary
computing models like GA and PSO based models, the new models are generally seen to be more
computationally effective, prediction wise more precise, and demonstrate quicker convergence.
A method for predicting the Indian Stock Market Indices was presented in 2012 by Mohapatra et
[8]
al. who used a functional link artificial neural network (FLANN) based on differential evolution. The
model predicts the S&P 500 and Dow jones industrial average stock price Indices one day, one week,
two weeks, and one month into the future using the back-propagation (BP) algorithm and the
differential evolution (DE) algorithm, respectively. The experimental data uses the market values from
the Bombay market exchange (BSE), the national stock exchange of India (NSE), the India futures
exchange (INFY), and a few other exchanges as input. DE always achieves better results than the BP
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algorithm. Measures of success include the mean absolute percentage error (MAPE) and the root mean
square error (RMSE). The results show that DE has much lower MAPE and RMSE than the BP
technique. Java-6 and NetBeans were used to carry out the computer analysis.
Standard & Poor’s 500 (S&P 500) stock indicators (stock price and traded volume) were compared
with the daily volume of tweets mentioning S&P 500 stocks at the market, sector, and company levels
by Mao et al.[9] in August. In addition, we use Twitter data as external input in a linear regression with
exogenous input model to forecast stock market indicators. Our early data shows that there is a
connection between the everyday volume of tweets and various measures of stock market activity.
What’s more, it seems that using Twitter to make stock market predictions is useful. In particular, we
find that including Twitter data in the algorithm improves its ability to forecast whether the S&P 500
ending price will go up or down.
Using an ordinal data set that was transformed, Siew and Nordin[10] investigated the theory and
application of regression methods for forecasting the direction of stock prices. Currency values and
financial ratios are among the many different data categories found in the initial retransformed data
source. Stock prices can be calculated using the information forms in monetary amounts and financial
ratios. The transformed dataset consists entirely of ordinal data, which allows for a uniform method of
rating stock price movements. Both procedures’ results are analyzed and evaluated. They use WEKA
(Waikato Environment for Knowledge Analysis), is a collection of machine learning algorithms for
data mining tasks, a machine learning program, to conduct regression analysis for the main design. Our
study environment is the ups and downs of the financial market on the Bursa Malaysia exchange. The
balance sheet, revenue statement, and cash flow statement from the company’s most recent yearly
report serve as the basis for this analysis. The stock market trading basic analysis methodology was
used to create the factors included in the dataset. In order to generate these results, WEKA classifiers
were used as methods. This study showed that the outcomes of regression techniques can be improved
for the prediction of stock price trend by using a dataset in standardized ordinal data format.
Shen et al.[11] predicted of stock market is a long-time attractive topic to researchers from different
fields. Specifically, many studies have been done to forecast the direction of the stock market with the
help of machine learning methods like support vector machine (SVM) and reinforcement learning.
Using support vector machines (SVM), we suggest a novel prediction method that takes advantage of
the temporal connection between international stock markets and different financial products to
forecast the direction of stocks for the following day. The numerical findings show that for the
NASDAQ, the S&P 500, and the DJIA, the precision of the predictions is 74.4%, 76%, and 77.6%,
respectively. Identical algorithms are used with various regression algorithms to track the true growth of
marketplaces. The suggested forecast algorithm is then evaluated in comparison to other standards
using a rudimentary trading model.
A model for predicting stock market price is suggested by Kazem et al.[12]. This model makes use of
chaos mapping, the firefly algorithm, and support vector regression (SVR). There are three phases to
the projection algorithm. In the first step, hidden dynamics in phase space are reconstructed using a
delay coordinate embedding technique. Optimizing SVR hyper parameters is the focus of the second
phase, which makes use of a chaos firefly algorithm. The third and final step involves using the
improved SVR to make stock price predictions. The suggested method is important in three ways.
While earlier research has used a genetic algorithm (GA) to improve SVR hyper parameters, this one-
use chaos theory and the firefly algorithm instead. Second, the dynamics of phase space are
reconstructed through a delay coordinate embedding technique. Third, because it uses systemic risk
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reduction, it is very good at making predictions. In order to demonstrate the efficacy of the suggested
method, we applied it to three of the most difficult time series data sets available from the NASDAQ
historical quotes database: Intel, National Bank shares, and Microsoft’s daily closed (last) stock price.
Mean squared error (MSE) and mean absolute percent error (MAPE) scores show that the proposed
model outperforms other methods of SVR, including genetic algorithm-based SVR (SVR-GA), chaotic
genetic algorithm-based SVR (SVR-CGA), firefly-based SVR (SVR-FA), artificial neural networks
(ANNs), and adaptive neuro-fuzzy inference systems (ANFIS). (MAPE).
In 2015, Patel et al.[13] tackled the challenge of forecasting the future direction of stock and stock
price indices across 23 stock markets in India. The research evaluates and contrasts four forecast
models using two different methods for inputting data: an artificial neural network (ANN), a support
vector machine (SVM), a random forest, and a Naive-Bayes. Input data can be obtained in two ways:
the first entails computing ten technical parameters from stock 26 transaction data (open, high, low,
and close prices), while the second centers on depicting these 27 technical parameters as trend
deterministic data. All 28 pairs of input methods are compared to the forecast models. Ten years of
history data (2003–2012) are used to compare the performance of two companies (Reliance Industries
and Infosys Ltd.) and two stock price benchmarks (CNX Nifty and S&P Bombay Stock Exchange (BSE)
Sensex). For the 31st method of input data, where ten technical factors are depicted as continuous
values, random forest appears to perform better than the other three prediction models, according to the
findings of the experiments. Moreover, experimental 33 findings demonstrate that all prediction models
benefit from representing these technical factors as 34 trend deterministic data, suggesting that this
representation is superior.
Stock market index forecasting was the primary area of research for Patel et al.[14]. Two indices
namely CNX Nifty and S&P Bombay stock exchange (BSE) Sensex from Indian stock markets are
selected for experimental evaluation. The past data of these two metrics is used as a basis for the
experiments, which span a period of 10 years. One-, ten-, and thirty-day forecasts are provided. In the
first step of the paper’s proposed two-stage fusion method, Support Vector Regression (SVR) is used.
Second-stage fusion models combine SVR with predictions from an Artificial Neural Network, a
Random Forest, or another SVR model. These multi-stage models are compared to single-stage models
(ANN, RF, and SVR) in terms of their forecast ability. A total of ten different technical metrics are used
as inputs across all of the forecast algorithms.
Stock return forecasting with this innovative hybrid model was suggested by Rather et al.[15]. The
suggested model incorporates two linear models—The autoregressive moving average model and the
exponential smoothing model—And one non-linear model—A recurrent neural network. A novel
classification algorithm is developed to produce training data for recurrent neural networks. Predictions
made by a recurrent neural network are generally accurate, unlike those made by linear models. The
suggested hybrid prediction model combines forecasts from the aforementioned three prediction-based
models with the intention of further enhancing the precision of predictions. In this paper, we present a
model for optimization that, when solved with genetic algorithms, produces optimum weights for the
suggested model. The findings corroborate the strong predictive abilities of the recurrent neural network.
To no one’s surprise, the suggested hybrid prediction model beats recurrent neural networks in terms of
forecast accuracy. When dealing with non-linear data whose patterns are challenging to capture with
conventional models, the suggested model is widely regarded as a potential new direction to explore in
the field of prediction-based models.

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Normal distribution market microstructure (MM) models are helpful tools for modeling financial
time series, but they do not account for skewness and heavy tails that may arise in a market and it is
opined by Xi et al.[16]. This article proposes a model of the heavy-tailed market substructure using the
student-t distribution (MM-t) to address this issue. An effective Markov chain monte Carlo (MCMC)
technique is devised for parameter estimation of the suggested model under the assumption of non-
normality. The efficiency of the estimation method is confirmed by the computer research. In an
empirical analysis of several stock market benchmarks, the suggested model is compared to MM
models using distributions like the normal distribution and a mixture of two normal distributions. For
some financial time series, the MM-t model offers a better match than the MM models with other
distributions, and empirical findings suggest that stock prices/returns have large tails. We also compare
the MM-t model to another form of model, the stochastic volatility (SV-t) model with a student’s t
distribution, and find that the MM-t model provides the best match for the three indices.
To produce trading choices more efficiently, Dash and Dash[17] used a novel decision support
system based on a computational efficient functional link artificial neural network (CEFLANN) and a
collection of rules. Here we formulate the issue of predicting stock trading decisions as a categorization
problem, with the buy, hold, and sell signs as the three possible classes. By studying the nonlinear
relationship between a small number of widely used technical indicators, the CEFLANN network used
by the decision support system generates a series of continuous trading indications in the interval 0e1.
In addition, the trend is followed and trading decisions are made based on the trend using the trading
signals produced by the system and a set of trading guidelines. The innovative aspect of the method is
that it combines the technical analysis principles with the learning power of a CEFLANN neural
network to predict when it will be most lucrative to buy or sell a company. The usefulness of the
suggested method is evaluated by contrasting the results of the model with those obtained using other
machine learning methods, such as the support vector machine (SVM), the naive Bayesian model
(NBM), the K closest neighbor model (KNN), and the decision tree (DT) model.
With the aid of mathematical and statistical tools, Gerlein et al.[18] used technical and quantitative
analysis in financial trading to assist buyers in determining when to place and cancel orders. While
these more conventional methods have served their purpose, new methods have evolved from the field
of artificial intelligence, such as machine learning and data mining, to analyze financial data. Simpler
models that have proven their worth in fields other than financial trading are worth considering to
ascertain their benefits and inherent limitations when used as trading analysis tools, even though the
majority of financial engineering research has focused on more complex computational models like
neural networks and support vector machines. Through a set of FOREX market trading simulations,
this study examines the function of basic machine learning models in generating trading profits. It
evaluates how well the models work and how certain model configurations generate reliable trading
forecasts. We discuss the importance of attribute selection, periodic retraining, and training set size in
generating positive cumulative returns for each machine learning model, and we show that simple
algorithms, which have previously been excluded from financial forecasting for trading applications,
can achieve comparable results to their more complex counterparts. The paper explains how the
classification capabilities, which directly affect the final profitability, can be improved by using a
combination of attributes in addition to technical indicators that has been used as inputs of the machine
learning-based predictors, such as price related features, seasonality features, and lagged values used in
classical time series analysis.

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If you’re an investor or dealer, you need a reliable stock price prediction in order to make educated
decisions as said by Labiad et al.[19]. As a result of their nonlinearity and nonstationarity, however,
values exhibit a complicated pattern of behavior. In this article, we apply three machine learning
methods—Random Forest (RF), gradient boosted trees (GBT), and support vector machines (SVM)—
To forecast minute-by-minute changes in the Moroccan stock market. (SVM). To enhance prediction
accuracy and decrease training time, a number of technical markers were used as input variables, and a
feature selection and samples selection phase were carried out. For this exercise, we use the intraday
values (tick-by-tick data) of Maroc telecom (IAM) shares over the course of eight years to compare the
results of various models. Our experiments have demonstrated that RF and GBT are better to SVM on
our dataset. Additionally, RF and GBT are well suited for short term predicting due to their minimal
computational complexity and decreased training time.
Market performance of Karachi stock exchange (KSE) on day closing by using various machine
learning methods and it was predicted by Usmani et al.[20]. The market is predicted to be either positive
or negative based on a variety of characteristics used in the prediction algorithm. In the model, we use
variables such as the price of oil, the price of gold and silver, the interest rate, the FEX rate, the news,
and a social media stream. Additionally, traditional statistical methods such as the simple moving
average (SMA) and the autoregressive integrated moving average (ARIMA) are utilized. single layer
perceptron (SLP), multi-layer perceptron (MLP), radial basis function (RBF), and support vector
machine (SVM) are some of the machine learning methods examined here. Furthermore, each of these
characteristics is examined independently. For the greatest results, use the MLP algorithm instead of
the other methods. The correlation between gasoline prices and market success was the strongest. The
outcomes indicate that the KSE-100 index’s future success can be forecast using machine learning
methods.
Financial time-series has been one of the most difficult issues in financial market research for quite
some time and it is forecasted by Tsantekidis et al.[21]. Investors typically use statistical models to help
them determine when it is optimal to join and leave the markets (or even simple qualitative methods).
However, the used models’ predicting precision is badly limited by the noisy and stochastic character of
markets. In order to overcome some of the problems with the aforementioned methods, new machine
learning techniques have been developed since the advent of computerized trading and the availability
of large quantities of data. In this paper, we suggest a recurrent neural network-based deep learning
technique for analyzing Limit order book data at high frequency to forecast future price changes. A
massive dataset of limit order book occurrences is used to assess the effectiveness of the suggested
technique.
Chen and Hao[22] looked into the future performance of stock market benchmarks, a topic of
interest and importance in the fields of finance and applications because it offers the possibility of
higher returns with reduced risk through the use of prudent currency exchange policies. Many
approaches have been attempted with varying degrees of success to achieve precise prediction, but it is
the machine learning approaches that have attracted focus and development. In order to accurately
forecast stock market benchmarks, we suggest a simple hybridized framework that combines the feature
weighted support vector machine and the feature weighted K-nearest neighbor. To begin, we develop a
comprehensive theory of feature weighted SVM for the data categorization by establishing a hierarchy
of feature weights based on their significance to the classification. Next, we compute the information
gain for each characteristic to establish its relative significance and obtain the weights. Finally, we
compute k weighted nearest neighbors from the past data and use them as features in feature weighted

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K-nearest neighbor to forecast future stock market values. In order to evaluate the efficacy of our
developed model, we show experimental findings on two prominent Chinese stock market indices,
namely the Shanghai and Shenzhen stock exchange indices. Our suggested model improves upon prior
methods for forecasting the short-, intermediate-, and long-term performance of the Shanghai stock
exchange composite index and the Shenzhen stock exchange component index. The suggested
algorithm is flexible enough to be applied to the forecasting of various stock market benchmarks.
Machine learning, a subfield of AI with the capacity to predict the future based on past experience,
and it was used by Hitam and Ismail[23]. Machine learning techniques like neural networks (NN),
support vector machines (SVM), and deep learning are among the methods suggested to build models.
In this article, we evaluate the accuracy of various machine learning methods for predicting the price of
digital currencies. In this article, we will be focusing on predicting time series data. Prior study has
shown that SVM gives a result that is almost or near to real result while also improving the accuracy of
the result itself, so it is clear that SVM has a number of advantages over other models in forecasting.
Recent studies have shown, however, that the general status and accuracy rate of the forecasting need
to be improved in order to be useful. This is because of the limited scope of the samples used and the
manipulation of the data by insufficient proof and expert analysts. This necessitates extensive study into
how close actual prices come to the predicted ones.
The fixed income market is crucial to the economy which is opined by Martin et al.[24]. Corporate
problems are related to sovereign issues, which are affected by central bank policy. Bonds are less
accessible and less transparent than stocks, so there is less information available to the public about
them. We show how machine learning models can be used to predict interest rates on U.S. Treasuries
of different terms and the clean values of business securities.
According to Reddy[25] stock trading is one of the most crucial operations in the realm of business.
Speculating on the future price of a company or other financial asset traded on a stock exchange is
known as stock market prediction. In this article, we explore how Machine Learning can be used to
forecast market performance. Most stock traders use basic and fundamental analysis or time series
analysis when forecasting stock prices. In order to make accurate stock market forecasts using machine
learning, Python is the tool of choice. In this article, we advocate for a machine learning (ML) strategy
that can be taught using publicly accessible stock market data and can then apply this knowledge to
make reliable forecasts. This research employs daily and up-to-the-minute stock values from three
marketplaces and two distinct market capitalization sizes to make stock price predictions using a
machine learning method called support vector machine (SVM).
According to Ren et al.[26], the stock market is heavily influenced by trader opinion. In addition to
stock market statistics, user-generated textual material on the Internet is a valuable source for reflecting
investor behavior and predicting stock values. In this work, we combine mood analysis with a machine
learning technique using a support vector machine. We also account for the weekday impact to create
more credible and grounded mood indices. Adding mood factors can improve direction prediction
accuracy for the SSE 50 Index by as much as 89.93%, with an additional 18.6 percentage points.
Further, our approach aids buyers in making better choices. Furthermore, these results suggest that
sentiment is one of the main indicators of the stock market because it likely includes valuable
information about the intrinsic values of assets.
Long short-term memory (LSTM) neural network models and support vector machine (SVM)
regression models were compared in research given by Lakshminarayanan and McCrae[27]. In total,

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eight different models went into the structure developed for this research. Here, we use LSTM to
construct four models and SVM to construct four additional models. This study makes heavy use of
two large databases. Two such examples are provided, one using only the normal stock price data from
the Dow jones index (DJI), and the other using that data as well as the exterior added input factors of
crude oil and gold rates. A top model for our raw data is revealed by this comparison research. Root-
mean-squared error, mean-squared error, mean-absolute error, mean-absolute percentage error, and R-
squared are all measures of model success. We review the models’ methods and outputs, and offer
suggestions for improving upon this work.
Big data analytics were used by Modi et al.[28] across many different fields to make precise
predictions and conduct thorough analyses of massive datasets. They make it possible to unearth
valuable insights that would otherwise be buried in mountains of data. In this article, we present a
method for analyzing the stock market, allowing investors to gain insight into the market’s volatility
while also gaining a better understanding of how to benefit from it. To begin, we present a literature
review of prior efforts in this field. We then detail our technique, which includes data gathering and
machine learning algorithms.
Mohan et al.[29] have long been interested in attempts to predict stock market values. The high
volatility of stock values makes them difficult to forecast, as they are sensitive to a wide range of
political and economic factors, as well as shifts in leadership, investor mood, and other factors. Both
past data and written information alone have proven to be inadequate for accurate stock price
forecasting. Existing mood analysis research has discovered a robust relationship between stock price
changes and the arrival of new stories. Support vector machines, naive bayes regression, and deep
learning are just a few of the many methods that have been tried in numerous mood analysis studies at
varying levels. The quality of results produced by deep learning algorithms is proportional to the
quantity of available training data. Previous studies have gathered and examined too little textual data,
which has led to inaccurate forecasts. In this paper, we show how to use deep learning models to better
stock price forecasting by collecting a large quantity of time series data and analyzing it alongside
relevant news stories. Our dataset contains five years’ worth of daily S&P500 stock values and over
265,000 stories from the financial press that mention these businesses. Due to the massive scale of the
dataset, we find cloud computing to be an indispensable tool for training forecast models and running
inference on a stock in real time.
Reddy[30] says the stock market is volatile, so understanding how it will likely behave in the future
will help investors plan their investments more effectively. An accurate prediction is a surefire way to
increase your earnings significantly. Time series analysis-based modeling has been used to improve the
forecast accuracy of numerous models suggested in the economics and finance literature. The primary
purpose of this article is to use stochastic time series ARIMA modeling to test for stationarity in time
series data and to forecast the direction of change in a stock market index. Taking into account the
lowest values of AIC, BIC, RMSE, MAE, MAPE, standard error of regression, and Adjusted R2, the
best suited ARIMA (0,1,0) model was selected for predicting the values of time series, viz.
BSE_CLOSE and NSE_CLOSE. Based on the weekly data from 6 January 2014 through 31 December
2017, the best-fitting model was used to make forecasts for the time spanning 1–7 January 2018 (3
anticipated values). (187 observed values). The study’s findings corroborated the use of the ARIMA
model for short-term time series forecasting, which should help the investing community make more
informed, lucrative choices.

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According to research by Zhong and Enke[31], big data analytic methods involving machine
learning algorithms are assuming a more pivotal position in many practical domains, including trading
in the stock market. However, there has been a dearth of research into the topic of daily stock market
return predictions, even when advanced machine learning methods like deep neural networks (DNNs)
are used. DNNs use a wide range of deep learning methods that differ in how well they perform based
on the specifics of the data representation format, network structure, activation function, and other
model factors. This paper introduces a big data analytics method based on 60 financial and economic
features to forecast the daily return path of the SPDR S&P 500 ETF (ticker symbol: SPY). To forecast
the daily trajectory of upcoming stock market index returns, we apply DNNs and conventional artificial
neural networks (ANNs) to the full preprocessed but untransformed dataset, as well as to two datasets
transformed via principal component analysis (PCA). With overfitting mitigated, a trend in the DNNs’
categorization accuracy is observed and illustrated as the number of hidden layers rises from 12 to 1000.
In addition, a battery of hypothesis testing procedures is applied to the classification, and the results of
the simulations demonstrate that the DNNs trained on the two PCA-represented datasets provide
significantly higher classification accuracy than the DNNs trained on the entire untransformed dataset
and several other hybrid machine learning algorithms. Furthermore, the DNN classification process led
by PCA-represented data outperforms the others evaluated, including a comparison against two
conventional benchmarks.
Anticipated returns in the stock market are typically framed as a forecasting issue where prices are
anticipated by Basak et al.[32]. International financial markets’ inherent instability makes forecasting
difficult. As a result, many of the difficulties associated with attempting to foresee future stock market
movements are mitigated by the use of forecasting and diffusion modeling. Investing with less worry if
you can reduce predicting inaccuracy. The present study frames the issue as a direction-predicting
exercise with positive and negative outcomes. To test whether stock values will rise or fall relative to
the price prevalent n days ago, we design an experimental approach for the categorization issue.
Random forests and gradient boosted decision trees (with XGBoost) are two methods that utilize
groups of decision trees to enable this link. We evaluate our method and detail the increases in accuracy
over previous forecasts for a number of different businesses. To accurately forecast the direction of
stock prices over the medium to long term, the current study introduces a new approach to selecting
technical indicators and using them as features.
Recently, palmprint recognition has gained popularity due to its high identification accuracy,
cheap cost of hardware, and simplicity of use with low quality images as seen by Michele et al.[33].
Numerous image-extracted palmprint characteristics have been used for identification purposes. One
disadvantage of conventional image-based biometric identification systems is that a lot of work has
gone into designing and getting a pertinent collection of effective hand-crafted features. To address this
issue, this article investigates the feasibility of applying Mobile Net V2 deep convolutional neural
networks to palmprint identification by fine-tuning a previously trained Mobile Net network. We also
investigate dropout support vector machines (SVM) and their functionality by training them on the
same deep features as the comparable pretrained networks. Hong Kong Polytechnic University of
Science and Technology provides the information used in the studies. There are 6000 128 × 128
grayscale pictures of 500 distinct hands included in the collection. State-of-the-art performance on the
datasets is shown to be achieved by the suggested methods. The second method, using Mobile Net V2-
based features and a support vector machine (SVM) classifier, outperforms the best previously
published findings with an average testing and confirmation accuracy rate of 100%.

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Stock price modeling and projection, as done by Long et al.[34], have been difficult goals for
academics and investors due to the noisy and non-stationary features of samples. Feature learning is a
job that has become more efficiently handled by a specially built network thanks to the development of
deep learning. For the purpose of feature extraction on financial time series samples and price
movement prediction assignment, this article proposes a new end-to-end model called multi-filters
neural network (MFNN). The multi-filter’s structure is built using a combination of convolutional and
recurrent neurons to acquire data from multiple feature areas and market perspectives. We use the CSI
300 indicator of Chinese stocks to put our MFNN through its paces in severe market prediction and
signal-based trading simulation jobs. The experimental findings demonstrate that in terms of precision,
profitability, and stability, our network is superior to the conventional machine learning models, the
statistical models, and the single-structure (convolutional, recurrent, and LSTM) networks.
Machine learning algorithms designed to achieve specific goals and Berislav and Hrvoje[35] have
quickly gained acceptance as a useful resource for analyzing financial data and making stock price
predictions. The purpose of this article is to use machine learning algorithms (linear regression,
gaussian processes, SMOreg, and neural network multilayer perceptron) on historical data from
February 1, 2010, to January 31, 2020, to make predictions for five major stock market indices (DAX,
Dow Jones, NASDAQ, Nikkei 225, and S&P 500). We used a variety of past basis period lengths and
forecast ranges to arrive at our predictions. Error measures were used to gauge the effectiveness of
machine learning techniques. Analysis shows that machine learning systems performed exceptionally
well as forecasters. For lower basis period lengths and forecast ranges, all systems’ accuracy improved.
It’s possible that the analysis’s findings will aid shareholders in settling on a workable investment plan.
However, predicting stock prices is still one of the most difficult problems in business.
The value of various machine learning techniques for predicting time series on financial markets, is
seen by Ghasemzadeha et al.[36]. One major challenge is that economic administrators and the scholarly
community are still hoping for more precise forecasting algorithms. When this is done, the accuracy of
the forecasts improves, leading to greater profits and streamlined operations. While introducing the best
features, this article will demonstrate how a financial time series technical factors available on the
Tehran stock market can be used to produce useful outcomes. The proposed strategy makes use of
machine learning methods based on regression, with an emphasis on choosing the most salient
characteristics to discover the optimal technical variables of the inputs. These processes were applied in
Python-based machine learning tools. This paper’s collection was comprised of stock information for
two businesses listed on the Tehran Stock Exchange, covering the years 2008 through 2018. The
experimental findings demonstrate that the top methods successfully determined optimal parameters for
the algorithms based on the chosen technical characteristics. Using those numbers allows for market
data predictions with a minimal margin of error.
However, stock markets are driven by volatile factors like microblogs and news, making it hard to
predict stock market index based on merely the historical data, as Khan et al.[37] have predicted. Given
the extreme volatility of the stock market, it is essential to accurately evaluate the impact of exterior
variables on stock forecasting. Since data from social media and financial news can influence
investment behavior, it can be used by machine learning systems to forecast stock market movements.
In this article, we apply algorithms to data from social media and financial news outlets to learn how
this information affects the reliability of stock market forecasts over a ten-day period. The data sets
undergo feature selection and spam tweets reduction to boost the efficiency and quality of forecasts. In
addition, we conduct tests to identify unpredictable stock markets and those that are particularly

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susceptible to the effects of financial and social media news. To find a reliable classifier, we examine the
outcomes of multiple methods and compare them. Finally, ensembles of classifiers and deep learning
are used to improve forecast accuracy. Predictions made using social media have an accuracy of
80.53%, while those made using financial news have an accuracy of 75.16%, according to our
experiments. We also demonstrate that social media has a larger impact on IBM and Microsoft shares
in New York, while financial news has a greater impact on London’s stock market. The aggregate of
random forest classifiers is determined to be the most accurate (at 83.22 percent).
It has been predicted by Kilimci and Duvar[38] that the directions in which stocks, exchange rates,
and stock markets will move are important and a busy study field for investors, analysts, and academics.
Based on an examination of nine high-volume banking equities listed on the Istanbul stock exchange
(BIST 100), this article proposes a method for doing direction prediction for the BIST 100 using word
embeddings and deep learning. To the best of our knowledge, no previous work has combined deep
learning techniques with word embedding methods to predict the direction of Turkish stocks and
market using either Turkish news articles or user comments from social media and other platforms. A
variety of deep learning methods, including LSTM networks, RNNs, and CNNs, as well as word
embedding models Word2Vec, GloVe, and FastText, are compared and contrasted to achieve this goal.
Four Turkish news sources are compiled to illustrate the usefulness of the suggested paradigm.
company-related stories from public disclosure platform (KAP), Bigpara’s textual technical analysis of
each company, and user feedback from Twitter and Mynet Finans are collected. The experimental
findings show that the direction of BIST 100 can be predicted with high accuracy using a mix of deep
learning techniques and word embedding methods.
Reviewing the literature, Obthong et al.[39] say that when investing in the stock market, quick
access to reliable data is essential for making sound buying choices. As a result of the sheer volume of
stocks exchanged on a stock market, there are a plethora of considerations that go into making any
given investment. Furthermore, stock market behavior is unpredictable and difficult to forecast.
Predicting the future value of a commodity is crucial but difficult for these reasons. This motivates
studies aimed at identifying the most efficient forecast model, one that can make the most precise
projection with the least amount of error. In order to better forecast stock prices, this article reviews
research on the use of machine learning techniques and algorithms.
When constructing a portfolio, Chen et al.[40] found that the future performance of equity markets
was the most important factor. Opportunities to use prediction theory in portfolio selection have
increased significantly with recent advances in machine learning. Many studies, however, demonstrate
that using just one prediction model is not enough to make highly precise forecasts and generate
substantial profits. In this article, we create an innovative portfolio building strategy by combining the
machine learning model for stock forecast with the mean-variance (MV) model for portfolio selection to
create a hybrid model. The two main steps of this approach are market forecasting and portfolio
management. In the first step, we suggest a composite model for stock price forecasting that combines
extreme gradient boosting (XGBoost) and an enhanced firefly algorithm (IFA). To fine-tune the
XGBoost’s settings, the IFA was created. Stocks with greater yield potential are chosen in the second
phase, and the MV model is used to pick the portfolio. When applied to data from the Shanghai stock
exchange, the findings show that the suggested approach outperforms both the status quo (methods that
don’t involve stock prediction) and industry standards in terms of return on investment and risk.
Janková[41] set out to conduct a comprehensive literature review on the topic of AI in the financial
markets, focusing on its primary study areas, current growth trends, and major publications. This
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document makes use of the bibliographic database viewer VOSViewer. Our results, based on an
evaluation of 353 papers and comments culled from the Web of Science database, are as follows.
Financial time series can be predicted using artificial intelligence tools like neural networks and fuzzy
logic, and decision models can be developed using the results; the most frequently cited authors in this
area are Markowitz and Lebaron. Much of the foundational study of artificial intelligence can be traced
back to the publication of expert system with application. Using powerful bibliometric techniques, we
offer in-depth analysis and a new perspective on the field of study, empowering researchers of all
levels—But particularly those just starting out—With the tools they need to make informed decisions
about their work. Focusing on mixed models, which are becoming increasingly prevalent in the field, is
advised for the study’s forecast of specific financial market segments.
Predicting stock market patterns, as Prasad and Seetharaman[42] did, is challenging but rewarding
work. With the advent of the GPU and the TPU, experts and academics are increasingly turning to
cutting-edge methods like machine learning to foresee movements in the stock market. Several stock-
trend prediction systems have been created in recent years. Reviewing machine learning research
papers and analyzing the significance of their results in the context of how stock price patterns produce
trading cues is becoming increasingly important for assisting investors interested in making short-term
investments in the stock market. To accomplish this, the authors of this article reviewed over fifty
scholarly works that explored different machine learning algorithms for a wide range of input variables.
They discovered that while the performance of models as measured by root-mean-square error (RMSE)
for regression and accuracy score for classification models varied greatly, the long short-term memory
(LSTM) model displayed higher accuracy than the rest of the machine and deep learning models
studied. When revenue and Sharpe ratio were used to evaluate algorithm performance, reinforcement
learning algorithms came out on top. In most cases, machine learning can be more profitable for dealers
than basic analysis. Although technical analysis is simple to execute, the resulting reward may
evaporate too quickly, making a profit with it seem almost impossible. Traders and buyers must,
therefore, familiarize themselves with machine, deep, and reinforcement learning algorithms. These
results are founded on the synthesis of the literature reviewed, which is presented in the following part.
To evaluate the accuracy of various classifications, Subasi et al.[43] provided a side-by-side analysis
of their predictions. Not only that, but the contrast is made with precision in mind. Each machine
learning technique is put to the test on the NASDAQ, NYSE, Nikkei, and FTSE 100. (FTSE).
Additionally, a normal and compromised data collection is used to evaluate several machine learning
methods.
Anomaly detection using machine learning is an extensively researched subject across many
different application areas, as discovered by Tiwari et al.[44]. Due to the scarcity of labeled data and the
fact that aberrant behaviors are frequently contextual and distributed across a series of anomalous
occurrences, the identification issue for market monitoring remains difficult. This study offers an in-
depth analysis of the most recent developments in machine learning techniques, with a focus on their
applications in the field of financial market monitoring. Here, we talk about the problems and solutions
that have arisen in this area of study, which has found most of its practical use in adjacent fields. In this
paper, we present a case study of a machine learning-based monitoring system design for a physical
power trading market and explore how the input data impacts the techniques’ ability to identify
abnormal market behaviors. Our research shows that ensemble algorithms based on regression trees can
accurately forecast values one day into the future, demonstrating their ability to identify anomalous
price movements.

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According to research by Beukel[45], stock success, growth, and danger all play significant roles in
the stock market and worldwide economy. Machine learning shows promise as a method for achieving
this. The danger and security of an investment in equity is measured by its price. People in the financial
market are increasingly on the lookout for ways to increase their profits as a result of the widespread
adoption of cryptocurrencies and the improvement in computing power. In this paper, I define machine
learning, discuss the factors that go into establishing stock values, and show how the application of
machine learning to the financial market has led to more precise valuations. Researchers’ results are
summarized and a conclusion is made.
According to Chen[46], the volatility and susceptibility to external variables that profoundly
influence investor mood make stock market research and forecast a difficult issue for finance specialists.
The most recent development in stock market prediction technologies is machine learning, which
generates predictions based on the values of current stock market indices by training on their previous
values. The findings, however, appear to be volatile and unreliable, and the prediction techniques and
algorithms are still in their early stages of development. The financial markets are highly sensitive to
how quickly and accurately forecasts can be made, so it’s crucial that the models be refined and the
range of machine learning techniques broadened. Through a qualitative summary of the results
obtained from various existing sources and experiments, this paper examines the relative merits of four
different models for stock market prediction: The support vector machine (SVM), the convolutional
neural network (CNN), the Regression-based model, and the long short-term memory (LSTM). This
paper’s findings suggest that SVM and the mix of CNN and LSTM are effective at forecasting stock
prices. The stock market is the marketplace where investors purchase and sell shares of publicly traded
businesses. The goal of every buyer and vendor in the stock market is to make as much money as
possible while minimizing their loses. Stock price forecasting can benefit from the application of
cutting-edge technologies like AI. Extreme volatility, non-linearity, and changes in both the internal
and exterior environment define the stock market. Using AI methods to identify this nonlinearity
allows for significantly enhanced prediction accuracy. Since the rapid growth of technology and
widespread adoption of personal computers in the 1990s, the study of how Artificial Intelligence (AI)
can be applied to financial finance has garnered a great deal of academic interest. The issue of
predicting stock prices has been the subject of numerous solutions since then. Based on a selection of
2326 papers drawn from the Scopus website between 1995 and 2019, this paper provides a
comprehensive analysis of the literature on the application of Artificial Intelligence to stock market
trades. This capstone project utilized artificial intelligence (AI) tools for stock market analysis and
prediction, as well as the establishment of complicated nonlinear connections between the input data
and the output data. Portfolio optimization, AI-based stock market prediction, financial mood analysis,
and hybrid methods combining two or more of these techniques were identified as distinct groups
within these articles. Each subfield’s study history from its inception to the present day is detailed. In
addition, a survey of the literature suggests that this field of study is receiving growing amounts of focus
and that previous studies have laid the groundwork for more recent ones to build upon.
The equity market is extremely unstable, as Jishtu et al.[47] pointed out. However, there are a
number of methods and perspectives one can employ to study this shifting paradigm and get ready for it
as technology advances. In this article we will discuss a variety of techniques for detecting market
patterns with relative ease. The proposed approach is all-encompassing due to its incorporation of pre-
processing the stock market dataset, various feature engineering techniques, and a bespoke deep
learning-based system for predicting stock market price trends. The forecast technique with the lowest

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error rate is the one most often recommended. For this research, we used three separate algorithms to
analyze the tone of press coverage of the company and its shares. The classification’s findings have
provided investors with more data for making educated wagering choices and a sharper understanding
of the market’s erratic swings for both long and short-term investors.
According to research by Soni and Srivastava[48], the social network database grows exponentially
as a result of the constant flow of new feedback, remarks, and messages. In order to understand how
customers feel about a business or its offerings, it is now essential to sift through mountains of data.
While English remains the most common language for web reviews, technological advancements and
increased literacy have led to an increase in Hindi-language content. In addition, understanding how
people feel about a product is crucial to Indian language mood analysis, and we give credence to
everyone’s opinions. We used the Hindi language repository for general news items from multiple news
sources to improve the precision of our classification. Naive Bayes, in addition to other machine
learning categorization methods, such as random forest, Support Vector Machines, and Logistic
Regression, were studied for their ability to accurately categorize texts.

3. Research methodology
The research methodology of machine learning in the finance sector involves several steps to
ensure that the research is conducted in a systematic and rigorous manner. The following are the
general steps that are typically followed in research on machine learning in finance:

3.1. Research question and hypothesis

The first step in any research is to identify a research question and develop a hypothesis that can be
tested using machine learning techniques. The research question should be relevant to the finance
sector and address a current problem or challenge.

3.2. Data collection

The next step is to collect the relevant data that will be used to train and test the machine learning
models. The data can be obtained from various sources, including financial statements, stock prices,
news articles, and social media.

3.3. Data pre-processing

Once the data is collected, it needs to be pre-processed to remove any irrelevant or duplicate data
and to convert the data into a format that can be used by the machine learning algorithms. This step
involves cleaning, transforming, and normalizing the data.

3.4. Feature selection

In this step, relevant features are selected from the pre-processed data that will be used to train the
machine learning models. Feature selection is an important step as it reduces the complexity of the
model and improves its performance.

3.5. Model selection

Once the features are selected, the next step is to select the appropriate machine learning model
that will be used to analyze the data. The model selection depends on the nature of the problem and the
type of data.

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3.6. Model training and testing

In this step, the selected model is trained using the pre-processed data, and its performance is
evaluated using a testing dataset. The performance of the model is evaluated using various metrics such
as accuracy, precision, recall, and F1-score.

3.7. Result interpretation

The final step is to interpret the results of the machine learning model and draw conclusions based
on the research question and hypothesis. The results are then discussed in the context of existing
literature and potential future research directions.
Overall, the research methodology for machine learning in finance involves a rigorous process of
data collection, pre-processing, feature selection, model selection, training, testing, and result
interpretation. These steps ensure that the research is conducted in a systematic and transparent manner
and that the results are reliable and valid.

4. Conclusion
In conclusion, the use of machine learning in financial markets has shown significant promise in
recent years, offering new opportunities for investors, traders, and policymakers to better understand
market behavior and make more informed decisions. ML techniques can be used to extract insights
from vast amounts of financial data, identify patterns and trends, and make predictions based on
historical data.
However, the application of ML in finance also poses significant challenges, including issues
related to data quality, over fitting, interpretability, and ethical considerations. These challenges require
careful consideration and attention to ensure that the benefits of using ML in finance are realized while
minimizing potential risks and harms.
Looking forward, further research is needed to address these challenges and to explore the full
potential of ML in financial markets. Future research could investigate the development of more robust
ML models that can address issues related to data quality and over fitting. Additionally, research could
focus on developing more interpretable and transparent ML models, enabling users to understand how
these models make predictions and identify potential sources of bias or error.
Overall, the use of ML in finance is a rapidly evolving area of research, with the potential to
transform the way financial markets are analyzed and understood. With careful attention to the
challenges and opportunities presented by these techniques, ML has the potential to significantly
benefit investors, traders, and policymakers, while ensuring the responsible and ethical use of these
powerful tools. So, ML is a powerful tool to predict the price of the financial markets.

Conflict of interest
The authors declare no conflict of interest.

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