An Intelligent Fusion Model with Portfolio Selection and Machine Learning for Stock Market Prediction

Abstract

Developing reliable equity market models allows investors to make more informed decisions. A trading model can reduce the risks associated with investment and allow traders to choose the best-paying stocks. However, stock market analysis is complicated with batch processing techniques since stock prices are highly correlated. In recent years, advances in machine learning have given us a lot of chances to use forecasting theory and risk optimization together. The study postulates a unique two-stage framework. First, the mean-variance approach is utilized to select probable stocks (portfolio construction), thereby minimizing investment risk. Second, we present an online machine learning technique, a combination of “perceptron” and “passive-aggressive algorithm,” to predict future stock price movements for the upcoming period. We have calculated the classification reports, AUC score, accuracy, and Hamming loss for the proposed framework in the real-world datasets of 20 health sector indices for four different geographical reasons for the performance evaluation. Lastly, we conduct a numerical comparison of our method’s outcomes to those generated via conventional solutions by previous studies. Our aftermath reveals that learning-based ensemble strategies with portfolio selection are effective in comparison.