Spatiotemporal Transformer for Stock Movement Prediction

Contributions

● Introduced Spatiotemporal Stock Transformer (STST) for predicting stock price

movements.
● Combines Transformer-Encoder with LSTM to capture spatiotemporal dependencies.
● Uses a novel spatiotemporal embedding layer to improve accuracy.

Dataset

Dataset Time Range Data Type Features Train/Validation

/Test Split

ACL18 2014–2016 Historical price Open, close, Specified in

data high, low, paper
volume, 22
indicators

KDD17 2007–2017 Historical price Open, close, Specified in

data high, low, paper
volume, 22
indicators

Results

● Accuracy: ACL18 (63.7%), KDD17 (56.9%).

● Investment Simulation:
○ ACL18: 15.2% profit (vs. 0.66% S&P 500).
○ KDD17: 26.8% profit (vs. 16.36% S&P 500).

Limitations

● Performance gap compared to STLAT (current state-of-the-art).

● Excludes external features (e.g., sentiment data, sector indices).
● Struggles with generalization over long time spans.
Improvements

● Add adversarial training to improve noise handling.

● Incorporate correlated assets and external features for better context.
● Optimize training methods and leverage transfer learning.

Single Paragraph Notes

The Spatiotemporal Stock Transformer (STST) is a novel model that combines a

Transformer-Encoder with LSTM to predict stock price movements by capturing spatiotemporal
dependencies. Using datasets like ACL18 (2014–2016) and KDD17 (2007–2017), the model
achieved accuracies of 63.7% and 56.9%, respectively. It also demonstrated real-world
applicability, outperforming the S&P 500 index with simulated profits of 15.2% (vs. 0.66%) for
ACL18 and 26.8% (vs. 16.36%) for KDD17. The STST uses a unique spatiotemporal
embedding layer and generates technical indicators from historical price data for predictions.
However, it slightly underperforms compared to the state-of-the-art STLAT model, lacks external
feature integration (e.g., sentiment data), and struggles to generalize across diverse market
conditions. Future work could involve adversarial training, incorporating correlated assets, and
leveraging additional data sources like social sentiment and macroeconomic indicators to
improve accuracy and generalization. The model sets a strong baseline for stock movement
prediction, with potential for future advancements.
1. Data Requirements Based on Model Complexity

● Simple Models (e.g., Logistic Regression, Linear Models):

○ Minimum Data: 1–2 years of daily stock data (~500 trading days).
○ Reason: These models rely on straightforward patterns and need less data to
generalize.
● Complex Models (e.g., Transformers, LSTMs):
○ Minimum Data: 5–10 years of daily data per stock (~1,250–2,500 trading days).
○ Reason: Deep learning models require large datasets to learn long-term
dependencies and avoid overfitting.
● High-Frequency Trading Models:
○ Granularity: Intraday data (e.g., minute or second-level resolution).
○ Minimum Data: 6–12 months of minute-level data for one stock or more for
diverse stocks.

2. Dataset Granularity

● Daily Data:
○ Ideal for longer-term predictions (e.g., daily price movements).
○ Historical data spanning 5–10 years is recommended.
● Intraday Data:
○ Needed for short-term predictions (e.g., predicting price changes in the next
minute or hour).
○ Collect at least 6 months to 1 year of minute-level data for one stock.

3. Number of Stocks

● Single Stock:
○ Collect 5–10 years of data for robust predictions.
● Multiple Stocks:
○ The model generalizes better with diverse stock data (e.g., 50–100 stocks from
different sectors).
○ Aim for 2–5 years per stock.

4. Training, Validation, and Testing Splits

A common practice is to split the data into:

● Training: 70–80% of the dataset (e.g., 2010–2018).

 ● Validation: 10–15% (e.g., 2019).
● Testing: 10–15% (e.g., 2020).

For example, if using 10 years of daily data (2,500 days):

● Training: ~1,750 days.

● Validation: ~375 days.
● Testing: ~375 days.

5. Handling Market Variability

To capture market changes (e.g., recessions, bull markets):

● Ensure data spans different economic cycles (e.g., financial crises, recoveries).
● Include data with significant volatility for better model generalization.

6. General Recommendations

● Dataset Size:
○ For transformer-based models (e.g., STST), aim for datasets containing at least
50,000–100,000 data points across multiple stocks.
○ Use multiple stocks or indices (e.g., NASDAQ-100 or S&P 500) for broader
representation.
● Features:
○ Historical prices: Open, close, high, low, adjusted close.
○ Technical indicators: Moving averages, RSI, MACD.
○ Volume and aggregated market sentiment.

Example Dataset Sizes for Different Use Cases

Use Case Granularity Duration Approx. Data Points

Long-term prediction Daily 5–10 years 1,250–2,500 per stock

Short-term prediction Intraday 6 months–1 year 250,000–500,000 per

stock

Portfolio-wide analysis Daily 5–10 years (50+ ~100,000+

stocks)
How to Ensure You Have Enough Data

1. Supplement Missing Data:

○ Use multiple data sources (e.g., Yahoo Finance, Quandl).
○ Impute missing values with interpolation or forward-fill.
2. Expand Features:
○ Use derived features like moving averages or volatility to augment smaller
datasets.
3. Data Augmentation:
○ Simulate data by introducing small random noise to replicate market variability
o achieve higher accuracy and profitability beyond the stated results for stock movement
prediction (e.g., ACL18: 63.7%, KDD17: 56.9%), you can focus on the following improvements:

1. Expand and Enrich the Dataset

Why:

The current datasets (ACL18 and KDD17) rely only on historical price data, which may not
capture broader market influences like sentiment, macroeconomic trends, and sector-level
correlations.

What to Do:

● Incorporate Additional Data Sources:

○ Sentiment Data:
■ Collect sentiment from social media (e.g., Twitter), news, or financial
blogs.
■ Use NLP models like BERT or RoBERTa to generate sentiment scores.
○ Macroeconomic Indicators:
■ Add data like GDP, inflation, interest rates, and unemployment rates.
○ Sector and Peer Data:
■ Include performance metrics of correlated stocks or sector indices.
● Increase Data Diversity:
○ Use more stocks, industries, or international data to generalize the model.
● Use More Granular Data:
○ Include intraday data (e.g., minute-level) to capture finer price movements.

How to Implement:

● Merge datasets from Alpha Vantage, Yahoo Finance, or scraping.

● Use Python libraries for feature engineering and merging data.

2. Improve Feature Engineering

Why:

The quality of input features directly affects the model's ability to learn patterns.

What to Do:

● Create Advanced Technical Indicators:

 ○ Indicators like Bollinger Bands, ATR (Average True Range), and VWAP (Volume
Weighted Average Price).
● Generate New Features:
○ Volatility measures: Historical volatility, implied volatility.
○ Time-based features: Month-end effects, weekday trends.
○ Aggregate and normalize data (e.g., sector averages or relative strength).
● Feature Selection:
○ Use techniques like Recursive Feature Elimination (RFE) or SHAP to identify the
most impactful features.

How to Implement:
python
Copy code
from ta import add_all_ta_features
df = add_all_ta_features(
df, open="Open", high="High", low="Low", close="Close",
volume="Volume"
)

3. Enhance the Model Architecture

Why:

Current results use a Spatiotemporal Transformer-LSTM model. You can enhance it by

combining advanced architectures or modifying its components.

What to Do:

● Incorporate Adversarial Training:

○ Helps handle noisy data and improve model generalization.
○ Implementation: Add adversarial noise to input features during training.
● Use Graph Neural Networks (GNNs):
○ Capture relationships between stocks in the same sector or index.
● Hybrid Models:
○ Combine CNNs for spatial feature extraction with transformers for temporal
dependencies.
● Fine-Tune Transformer Layers:
○ Experiment with more encoder layers, attention heads, or larger embedding
sizes.
● Multi-Modal Models:
○ Combine transformers for text sentiment and numerical time-series data.
How to Implement:

● Use PyTorch or TensorFlow to experiment with multi-modal networks.

● Pretrain the transformer with data augmentation before fine-tuning.

4. Optimize Training and Hyperparameters

Why:

Optimal hyperparameters improve the model's convergence and stability.

What to Do:

● Advanced Hyperparameter Tuning:

○ Use automated tools like Optuna or Ray Tune.
● Regularization Techniques:
○ Add dropout layers to prevent overfitting.
○ Use weight decay or L2 regularization.
● Learning Rate Scheduling:
○ Implement a cosine annealing or cyclical learning rate.

How to Implement:
python
Copy code
from transformers import Trainer, TrainingArguments

training_args = TrainingArguments(
output_dir='./results',
num_train_epochs=5,
per_device_train_batch_size=16,
warmup_steps=500,
weight_decay=0.01,
logging_dir='./logs',
evaluation_strategy="steps"
)

5. Experiment with Context Window Size

Why:
The context window size determines the number of timesteps the model considers for
predictions. A suboptimal size may limit performance.

What to Do:

● Test different window sizes (e.g., 16, 32, 64).

● Use multi-scale approaches to analyze both short- and long-term dependencies.

6. Add External Regularization

Why:

External shocks (e.g., political events or macroeconomic changes) influence stock movements
but aren't considered in the current model.

What to Do:

● Use volatility indices (e.g., VIX).

● Add political or event-based dummy variables (e.g., elections, crises).

7. Improve Data Preprocessing

Why:

Better preprocessing ensures clean, normalized data, reducing noise in the model.

What to Do:

● Normalize and scale features using MinMaxScaler or StandardScaler.

● Handle missing values with imputation or forward-filling.
● Decompose time-series data using Seasonal-Trend Decomposition.

Example:
python
Copy code
from sklearn.preprocessing import StandardScaler

scaler = StandardScaler()
df_scaled = scaler.fit_transform(df)
8. Evaluate and Iterate

Why:

Continuous evaluation allows fine-tuning and identifying weak areas in the model.

What to Do:

● Evaluation Metrics:
○ Use additional metrics like F1-Score, Precision-Recall, and Sharpe Ratio.
● Backtesting:
○ Simulate trades on historical data to test profitability.

Expected Impact:

1. Incorporating diverse features will enhance the model's ability to learn complex
relationships.
2. Advanced architectures like GNNs or multi-modal models will improve generalization.
3. Optimized training will increase stability and convergence speed.

These changes can potentially push the accuracy beyond 70% for ACL18 and 60% for KDD17
while improving profitability metrics. Let me know if you'd like detailed implementation guidance!

4o

1. Expand Input Features

What to Do:

Incorporate additional data sources that capture diverse aspects of the market.

How to Do:
 ● Sentiment Analysis: Use sentiment from social media (e.g., Twitter), news articles, or
financial blogs.
○ Implementation:
■ Use pretrained NLP models (e.g., BERT) to extract sentiment scores.
■ Combine with historical stock data as additional input features.
● Macroeconomic Indicators:
○ Add GDP, inflation rates, interest rates, and unemployment data.
● Sector and Correlated Assets:
○ Include features representing indices or related stock movements.
○ Implementation:
■ Extend the spatiotemporal embedding to include multiple stocks
simultaneously.

2. Enhance the Model Architecture

What to Do:

Modify the STST architecture for better performance and generalization.

How to Do:

● Adversarial Training:
○ Introduce adversarial perturbations during training to simulate market noise.
○ Implementation:
■ Use FGSM (Fast Gradient Sign Method) or PGD (Projected Gradient
Descent) techniques to add noise to input features during training.
● Dynamic Time-Series Features:
○ Replace fixed Time2Vec embeddings with trainable temporal embeddings.
● Hybrid Architectures:
○ Combine transformers with graph neural networks (GNNs) for sector
relationships.

3. Optimize Training

What to Do:

Improve training techniques for stability and convergence.

How to Do:

● Hyperparameter Optimization:
○ Use Bayesian optimization or Tree-structured Parzen Estimators (TPE) to
automate parameter tuning.
 ● Regularization:
○ Add dropout layers and use L2 regularization for better generalization.
● Data Augmentation:
○ Generate synthetic data by perturbing historical prices or applying methods like
SMOTE for balanced training data.

4. Improve Data Handling

What to Do:

Address dataset limitations and augment data for richer training.

How to Do:

● Extend Historical Data:

○ Include datasets with more recent and diverse economic periods.
○ Merge ACL18 and KDD17 datasets and others like Quandl or Alpha Vantage.
● Feature Engineering:
○ Develop custom technical indicators or extract features using dimensionality
reduction (e.g., PCA).

5. Integrate Explainability

What to Do:

Enable model interpretability to improve trust and decision-making.

How to Do:

● Attention Visualization:
○ Visualize which timesteps or features (e.g., opening price, volume) the model
attends to.
● SHAP/LIME:
○ Use SHAP (SHapley Additive exPlanations) or LIME (Local Interpretable
Model-agnostic Explanations) to analyze feature importance.

6. Expand Evaluation Metrics

What to Do:
Evaluate the model on additional performance indicators.

How to Do:

● Risk-Adjusted Metrics:
○ Use Sharpe Ratio, Sortino Ratio, and Maximum Drawdown alongside accuracy
and MCC.
● Realistic Simulations:
○ Simulate trading scenarios with transaction costs, slippage, and liquidity
constraints.

7. Introduce Transfer Learning

What to Do:

Use pretrained models to accelerate training and improve performance.

How to Do:

● Pretrain on Financial Data:

○ Use large-scale datasets for pretraining before fine-tuning on ACL18 or KDD17.
● Cross-Domain Knowledge:
○ Transfer learning from related domains like weather or demand forecasting for
time-series data.

8. Experiment with Larger Context Windows

What to Do:

Analyze long-term trends by expanding the context window.

How to Do:

● Experiment with varying window sizes (e.g., 64, 128 days) and test performance
impacts.
● Use multi-scale time-series analysis to combine short-term and long-term patterns.

9. Deploy in Real-World Scenarios

What to Do:
Validate the model's usability in practical settings.

How to Do:

● Paper Trading:
○ Use platforms like Alpaca or QuantConnect to test strategies in simulated
environments.
● Feedback Loops:
○ Implement live trading, collect performance feedback, and retrain models
iteratively.

10. Publish Improvements

What to Do:

Contribute back to the research community.

How to Do:

● Release the improved model as open source.

● Write a research paper comparing your enhancements with the original STST.

Example Tools/Frameworks:

● Libraries: PyTorch, TensorFlow, Scikit-learn.

● Datasets: Quandl, Alpha Vantage, Yahoo Finance API.
● Optimization: Optuna, Ray Tune.
● Visualization: Matplotlib, Plotly, SHAP.

By following this roadmap, you can significantly enhance the STST model and advance its
applicability to real-world stock movement prediction tasks. Let me know if you'd like detailed
code snippets or guidance on any specific step!