Identifying Stock Prices Using an Advanced Hybrid ARIMA-Based Model: A Case of Games Catalogs

Abstract

At the beginning of 2020, the COVID-19 pandemic struck the world, affecting the pace of life and the economic behavioral patterns of people around the world, with an impact exceeding that of the 2008 financial crisis, causing a global stock market crash and even the first recorded negative oil prices. Under the impact of this pandemic, due to the global large-scale quarantine and lockdown measures, game stocks belonging to the stay-at-home economy have become the focus of investors from all over the world. Therefore, under such incentives, this study aims to construct a set of effective prediction models for the price of game stocks, which could help relevant stakeholders—especially investors—to make efficient predictions so as to achieve a profitable investment niche. Moreover, because stock prices have the characteristics of a time series, and based on the relevant discussion in the literature, we know that ARIMA (the autoregressive integrated moving average) prediction models have excellent prediction performance. In conclusion, this study aims to establish an advanced hybrid model based on ARIMA as an excellent prediction technology for the price of game stocks, and to construct four groups of different investment strategies to determine which technical models of investment strategies are suitable for different game stocks. There are six important directions, experimental results, and research findings in the construction of advanced models: (1) In terms of the experiment, the data are collected from the daily closing prices of game-related stocks on the Taiwan Stock Exchange, and the sample range is from 2014 to 2020. (2) In terms of the performance verification, the return on investment is used as the evaluation standard to verify the availability of the ARIMA prediction model. (3) In terms of the research results, the accuracy of the model in predicting the prices of listed stocks can reach the 95% confidence interval predicted by the model 14 days after the closing price, and the OTC stocks fall within the 95% confidence interval for 3 days. (4) In terms of the empirical study of the rate of return, the investors can obtain a better rate of return than the benchmark strategy by trading the game stocks based on the indices set by the ARIMA model in this study. (5) In terms of the research findings, this study further compares the rate of return of trading strategies with reference to the ARIMA index and the rate of return of trading strategies with reference to the monitoring indicator, finding no significant difference between the two. (6) Different game stocks apply for different technical models of investment strategies.