A Comparative Analysis of the Application of Machine Learning Algorithms and Econometric Models in Stock Market Prediction

Zhehan Ni; Weilun Chen

doi:10.54691/bcpbm.v34i.3108

Authors

Zhehan Ni
Weilun Chen

DOI:

https://doi.org/10.54691/bcpbm.v34i.3108

Keywords:

Machine Learning, Econometric Model, Stock Market Prediction, ARIMA, LSTM.

Abstract

Forecasting the future price trend of a stock traded on a financial exchange is the aim of stock market prediction. In recent decades, stock market prediction has been a fascinating topic in the domain of Data Science and Finance. In reality, the stock movement is ambiguous and chaotic due to various influencing factors such as government policy, current events, interest rates Etc. At the same time, accurate enough forecasting of stock price movement leads to substantial benefits for investors. This paper provides a comprehensive review of the application and comparison of Machine Learning (ML) algorithms and Econometric Models in stock market prediction. The mentioned models are categorized into (i) ML algorithms, including Linear Regression (LR), K-nearest neighbors (KNN), Support Vector Machine (SVM), and Long Short-Term Memory (LSTM). (ii) Econometric Models, including Autoregressive Integrated Moving Average (ARIMA) Model, Capital Asset Pricing Model (CAPM), and Fama-French (FF) Factor Model.

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