A number of studies have investigated the predictability of Chinese stock returns with economic variables.Given the newly emerged dataset from the Internet,this paper investigates whether the Baidu Index can be employ...A number of studies have investigated the predictability of Chinese stock returns with economic variables.Given the newly emerged dataset from the Internet,this paper investigates whether the Baidu Index can be employed to predict Chinese stock returns.The empirical results show that 1)the Search Frequency of Baidu Index(SFBI)can predict next day’s price changes;2)the stock prices go up when individual investors pay less attention to the stocks and go down when individual investors pay more attention to the stocks;3)the trading strategy constructed by shorting on the most SFBI and longing on the least SFBI outperforms the corresponding market index returns without consideration of the transaction costs.These results complement the existing literature on the predictability of Chinese stock returns and have potential implications for asset pricing and risk management.展开更多
Forecasting changes in stock prices is extremely challenging given that numerous factors cause these prices to fluctuate.The random walk hypothesis and efficient market hypothesis essentially state that it is not poss...Forecasting changes in stock prices is extremely challenging given that numerous factors cause these prices to fluctuate.The random walk hypothesis and efficient market hypothesis essentially state that it is not possible to systematically,reliably predict future stock prices or forecast changes in the stock market overall.Nonetheless,machine learning(ML)techniques that use historical data have been applied to make such predictions.Previous studies focused on a small number of stocks and claimed success with limited statistical confidence.In this study,we construct feature vectors composed of multiple previous relative returns and apply the random forest(RF),support vector machine(SVM),and long short-term memory(LSTM)ML methods as classifiers to predict whether a stock can return 2% more than its index in the following 10 days.We apply this approach to all S&P 500 companies for the period 2017-2022.We assess performance using accuracy,precision,and recall and compare our results with a random choice strategy.We observe that the LSTM classifier outperforms RF and SVM,and the data-driven ML methods outperform the random choice classifier(p=8.46e^(-17) for accuracy of LSTM).Thus,we demonstrate that the probability that the random walk and efficient market hypotheses hold in the considered context is negligibly small.展开更多
The efficient market hypothesis in traditional financial theory struggles to explain the short-term irrational fluctuations in the A-share market,where investor sentiment fluctuations often serve as the core driver of...The efficient market hypothesis in traditional financial theory struggles to explain the short-term irrational fluctuations in the A-share market,where investor sentiment fluctuations often serve as the core driver of abnormal stock price movements.Traditional sentiment measurement methods suffer from limitations such as lag,high misjudgment rates,and the inability to distinguish confounding factors.To more accurately explore the dynamic correlation between investor sentiment and stock price fluctuations,this paper proposes a sentiment analysis framework based on large language models(LLMs).By constructing continuous sentiment scoring factors and integrating them with a long short-term memory(LSTM)deep learning model,we analyze the correlation between investor sentiment and stock price fluctuations.Empirical results indicate that sentiment factors based on large language models can generate an annualized excess return of 9.3%in the CSI 500 index domain.The LSTM stock price prediction model incorporating sentiment features achieves a mean absolute percentage error(MAPE)as low as 2.72%,significantly outperforming traditional models.Through this analysis,we aim to provide quantitative references for optimizing investment decisions and preventing market risks.展开更多
Forecasting stock returns is extremely challenging in general,and this task becomes even more difficult given the turbulent nature of the Chinese stock market.We address the stock selection process as a statistical le...Forecasting stock returns is extremely challenging in general,and this task becomes even more difficult given the turbulent nature of the Chinese stock market.We address the stock selection process as a statistical learning problem and build crosssectional forecast models to select individual stocks in the Shanghai Composite Index.Decile portfolios are formed according to rankings of the forecasted future cumulative returns.The equity market’s neutral portfolio-formed by buying the top decile portfolio and selling short the bottom decile portfolio-exhibits superior performance to,and a low correlation with,the Shanghai Composite Index.To make our strategy more useful to practitioners,we evaluate the proposed stock selection strategy’s performance by allowing only long positions,and by investing only in Ashare stocks to incorporate the restrictions in the Chinese stock market.The longonly strategies still generate robust and superior performance compared to the Shanghai Composite Index.A close examination of the coefficients of the features provides more insights into the changes in market dynamics from period to period.展开更多
基金This work is supported by the National Natural Science Foundation of China(71320107003 and 71532009).
文摘A number of studies have investigated the predictability of Chinese stock returns with economic variables.Given the newly emerged dataset from the Internet,this paper investigates whether the Baidu Index can be employed to predict Chinese stock returns.The empirical results show that 1)the Search Frequency of Baidu Index(SFBI)can predict next day’s price changes;2)the stock prices go up when individual investors pay less attention to the stocks and go down when individual investors pay more attention to the stocks;3)the trading strategy constructed by shorting on the most SFBI and longing on the least SFBI outperforms the corresponding market index returns without consideration of the transaction costs.These results complement the existing literature on the predictability of Chinese stock returns and have potential implications for asset pricing and risk management.
基金funded by The University of Groningen and Prospect Burma organization.
文摘Forecasting changes in stock prices is extremely challenging given that numerous factors cause these prices to fluctuate.The random walk hypothesis and efficient market hypothesis essentially state that it is not possible to systematically,reliably predict future stock prices or forecast changes in the stock market overall.Nonetheless,machine learning(ML)techniques that use historical data have been applied to make such predictions.Previous studies focused on a small number of stocks and claimed success with limited statistical confidence.In this study,we construct feature vectors composed of multiple previous relative returns and apply the random forest(RF),support vector machine(SVM),and long short-term memory(LSTM)ML methods as classifiers to predict whether a stock can return 2% more than its index in the following 10 days.We apply this approach to all S&P 500 companies for the period 2017-2022.We assess performance using accuracy,precision,and recall and compare our results with a random choice strategy.We observe that the LSTM classifier outperforms RF and SVM,and the data-driven ML methods outperform the random choice classifier(p=8.46e^(-17) for accuracy of LSTM).Thus,we demonstrate that the probability that the random walk and efficient market hypotheses hold in the considered context is negligibly small.
文摘The efficient market hypothesis in traditional financial theory struggles to explain the short-term irrational fluctuations in the A-share market,where investor sentiment fluctuations often serve as the core driver of abnormal stock price movements.Traditional sentiment measurement methods suffer from limitations such as lag,high misjudgment rates,and the inability to distinguish confounding factors.To more accurately explore the dynamic correlation between investor sentiment and stock price fluctuations,this paper proposes a sentiment analysis framework based on large language models(LLMs).By constructing continuous sentiment scoring factors and integrating them with a long short-term memory(LSTM)deep learning model,we analyze the correlation between investor sentiment and stock price fluctuations.Empirical results indicate that sentiment factors based on large language models can generate an annualized excess return of 9.3%in the CSI 500 index domain.The LSTM stock price prediction model incorporating sentiment features achieves a mean absolute percentage error(MAPE)as low as 2.72%,significantly outperforming traditional models.Through this analysis,we aim to provide quantitative references for optimizing investment decisions and preventing market risks.
文摘Forecasting stock returns is extremely challenging in general,and this task becomes even more difficult given the turbulent nature of the Chinese stock market.We address the stock selection process as a statistical learning problem and build crosssectional forecast models to select individual stocks in the Shanghai Composite Index.Decile portfolios are formed according to rankings of the forecasted future cumulative returns.The equity market’s neutral portfolio-formed by buying the top decile portfolio and selling short the bottom decile portfolio-exhibits superior performance to,and a low correlation with,the Shanghai Composite Index.To make our strategy more useful to practitioners,we evaluate the proposed stock selection strategy’s performance by allowing only long positions,and by investing only in Ashare stocks to incorporate the restrictions in the Chinese stock market.The longonly strategies still generate robust and superior performance compared to the Shanghai Composite Index.A close examination of the coefficients of the features provides more insights into the changes in market dynamics from period to period.
