1D-CapsNet-LSTM: A Deep Learning-Based Model for Multi-Step Stock Index Forecasting

• URL: http://arxiv.org/abs/2310.02090v2
• Date: Thu, 2 Nov 2023 15:49:00 GMT
• Title: 1D-CapsNet-LSTM: A Deep Learning-Based Model for Multi-Step Stock Index Forecasting
• Authors: Cheng Zhang, Nilam Nur Amir Sjarif, Roslina Ibrahim
• Abstract summary: This study investigates the potential of integrating a 1D CapsNet with an LSTM network for multi-step stock index forecasting. To this end, a hybrid 1D-CapsNet-LSTM model is introduced, which utilizes a 1D CapsNet to generate high-level capsules. The proposed 1D-CapsNet-LSTM model consistently outperforms baseline models in two key aspects.
• Score: 6.05458608266581
• License: http://creativecommons.org/licenses/by-nc-nd/4.0/
• Abstract: Multi-step stock index forecasting is vital in finance for informed decision-making. Current forecasting methods on this task frequently produce unsatisfactory results due to the inherent data randomness and instability, thereby underscoring the demand for advanced forecasting models. Given the superiority of capsule network (CapsNet) over CNN in various forecasting and classification tasks, this study investigates the potential of integrating a 1D CapsNet with an LSTM network for multi-step stock index forecasting. To this end, a hybrid 1D-CapsNet-LSTM model is introduced, which utilizes a 1D CapsNet to generate high-level capsules from sequential data and a LSTM network to capture temporal dependencies. To maintain stochastic dependencies over different forecasting horizons, a multi-input multi-output (MIMO) strategy is employed. The model's performance is evaluated on real-world stock market indices, including S&P 500, DJIA, IXIC, and NYSE, and compared to baseline models, including LSTM, RNN, and CNN-LSTM, using metrics such as RMSE, MAE, MAPE, and TIC. The proposed 1D-CapsNet-LSTM model consistently outperforms baseline models in two key aspects. It exhibits significant reductions in forecasting errors compared to baseline models. Furthermore, it displays a slower rate of error increase with lengthening forecast horizons, indicating increased robustness for multi-step forecasting tasks.

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