Machine learning methods for financial forecasting and trading profitability: Evidence during the Russia–Ukraine war
| Title: | Machine learning methods for financial forecasting and trading profitability: Evidence during the Russia–Ukraine war |
|---|---|
| Authors: | Yaohao Peng, João Gabriel de Moraes Souza |
| Source: | REGE Revista de Gestão, Vol 31, Iss 2, Pp 152-165 (2024) |
| Publisher Information: | Emerald Publishing, 2024. |
| Publication Year: | 2024 |
| Collection: | LCC:Commerce LCC:Business |
| Subject Terms: | Time-series forecasting, Algorithmic trading, Support vector machines, Russia–Ukraine war, Efficient market hypothesis, Trading profitability, Commerce, HF1-6182, Business, HF5001-6182 |
| More Details: | Purpose – This study aims to evaluate the effectiveness of machine learning models to yield profitability over the market benchmark, notably in periods of systemic instability, such as the ongoing war between Russia and Ukraine. Design/methodology/approach – This study made computational experiments using support vector machine (SVM) classifiers to predict stock price movements for three financial markets and construct profitable trading strategies to subsidize investors’ decision-making. Findings – On average, machine learning models outperformed the market benchmarks during the more volatile period of the Russia–Ukraine war, but not during the period before the conflict. Moreover, the hyperparameter combinations for which the profitability is superior were found to be highly sensitive to small variations during the model training process. Practical implications – Investors should proceed with caution when applying machine learning models for stock price forecasting and trading recommendations, as their superior performance for volatile periods – in terms of generating abnormal gains over the market – was not observed for a period of relative stability in the economy. Originality/value – This paper’s approach to search for financial strategies that succeed in outperforming the market provides empirical evidence about the effectiveness of state-of-the-art machine learning techniques before and after the conflict deflagration, which is of potential value for researchers in quantitative finance and market professionals who operate in the financial segment. |
| Document Type: | article |
| File Description: | electronic resource |
| Language: | Portuguese |
| ISSN: | 2177-8736 1809-2276 |
| Relation: | https://doaj.org/toc/1809-2276; https://doaj.org/toc/2177-8736 |
| DOI: | 10.1108/REGE-05-2022-0079/full/pdf |
| DOI: | 10.1108/REGE-05-2022-0079 |
| Access URL: | https://doaj.org/article/d15fe28b410b4547bd59a110114fd286 |
| Accession Number: | edsdoj.15fe28b410b4547bd59a110114fd286 |
| Database: | Directory of Open Access Journals |
| ISSN: | 21778736 18092276 |
|---|---|
| DOI: | 10.1108/REGE-05-2022-0079/full/pdf |
| Published in: | REGE Revista de Gestão |
| Language: | Portuguese |