Stock price prediction using principal components.

ABSTRACT: The literature provides strong evidence that stock price values can be predicted from past price data. Principal component analysis (PCA) identifies a small number of principle components that explain most of the variation in a data set. This method is often used for dimensionality reduction and analysis of the data. In this paper, we develop a general method for stock price prediction using time-varying covariance information. To address the time-varying nature of financial time series, we assign exponential weights to the price data so that recent data points are weighted more heavily. Our proposed method involves a dimension-reduction operation constructed based on principle components. Projecting the noisy observation onto a principle subspace results in a well-conditioned problem. We

SUBMITTER: Ghorbani M 

PROVIDER: S-EPMC7083277 | biostudies-literature | 2020

REPOSITORIES: biostudies-literature