Multivariate Bayesian Time-Series Model with Multi-temporal Convolution Network for Forecasting Stock Market During COVID-19 Pandemic

Abstract

AbstractThe paper proposes a hybrid algorithm for forecasting multiple correlated time-series data, which consists of two main steps. First, it employs a multivariate Bayesian structural time series (MBSTS) approach as a base step. This method allows for the incorporation of potentially high-dimensional regression components, and it utilizes spike and slab priors to identify a parsimonious model. Second, the algorithm includes a post-model fitting diagnostic step where the residuals from the MBSTS step are processed through a multi-input/output temporal convolutional network (M-TCN) with multiple time scale feature learning. This step serves as an alternative to traditional subjective residual-based diagnostic procedures in time-series analysis, with the aim of improving forecasting accuracy. The key advantage of the M-TCN is its ability to capture sequential information efficiently. The M-TCN expands the field of convolution kernel without increasing the number of parameters, thus enhancing the capacity of model to capture complex sequential patterns. The paper presents two applications showcasing the effectiveness of the proposed hybrid algorithm. First, it utilizes pre-lockdown data from eleven Nifty stock sectoral indices to predict stock price movements, including the initial post-lockdown upturn. In the second application, it focuses on stock market data from pharmaceutical companies involved in manufacturing COVID-19 vaccines. In both cases, sentiment data sourced from newspapers and social media serve as the regression component. Through rigorous analysis, the paper demonstrates that the hybrid model outperforms various benchmark models, including LSTM, Bidirectional Encoder Representations from Transformers (BERT)-based LSTM, Deep Transformer Model, and GRU, among others, in terms of forecasting accuracy. This underscores the utility of the hybrid algorithm, particularly in predicting stock market trends during the COVID-19 pandemic period and its associated market dynamics.