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Stock Price Forecasting With Innovative LSTM Deep Learning Model Using Historical Data

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14 views

Stock Price Forecasting With Innovative LSTM Deep Learning Model Using Historical Data

Uploaded by

219y1a3923
Copyright
© © All Rights Reserved
Available Formats
Download as ODT, PDF, TXT or read online on Scribd
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Stock Price Forecasting with Innovative LSTM Deep

Learning Model Using Historical Data

ABSTRACT
Stock price forecasting is a crucial component of financial analysis,
demanding sophisticated models to predict market trends accurately. With
the increasing complexity of market dynamics, traditional methods are
often inadequate. This project explores various forecasting models to
predict stock prices effectively using historical data. Traditional forecasting
methods, such as linear regression and ARIMA (Autoregressive Integrated
Moving Average), have limitations in handling complex, nonlinear
relationships and longterm dependencies inherent in stock data. This
study introduces an advanced approach using Long Short-Term Memory
(LSTM) networks to address these shortcomings. LSTM networks excel in
modeling sequential data and long-term dependencies through their
memory cells and gating mechanisms, making them highly suitable for
predicting stock prices. The LSTM-based approach provides a more robust
and accurate forecasting solution compared to traditional models.
Keywords : Stock Price Forecasting, LSTM Deep Learning, Historical Data,
Time Series Analysis, Neural Networks, Linear Regression, ARIMA,
Sequential Data Modeling, Forecast Accuracy.

PROBLEM DEFINITION
The core problem in stock price forecasting is that traditional models like
linear regression and ARIMA are inadequate for capturing the complex,
nonlinear nature of stock market data. Linear regression assumes a simple
linear relationship, which cannot account for the intricate patterns and
dependencies in financial time series. ARIMA, though useful for basic time
series tasks, struggles with the volatile and dynamic nature of stock prices,
failing to capture long-term trends and nonlinear behavior. This leads to
inaccurate predictions, which can result in poor investment decisions and
increased financial risk. Additionally, these models lack the flexibility to
adapt to sudden market fluctuations and evolving conditions. Stock prices
are influenced by a variety of factors, such as economic events and
investor sentiment, making it essential to use more advanced techniques.
The challenge is finding a model that can effectively handle the
complexities of stock data and deliver more accurate, real-time forecasts.

Existing Work
Existing work in stock price forecasting has primarily relied on traditional
models like linear regression and ARIMA. Linear regression assumes a
simple linear relationship, which limits its effectiveness in capturing the
complex, nonlinear dynamics of financial markets. ARIMA, while useful for
univariate time series forecasting, struggles with nonlinear patterns and
fails to account for long-term dependencies often found in stock data.
Additionally, machine learning techniques such as Support Vector
Machines (SVM) and Random Forest have been explored to enhance
prediction accuracy, offering better adaptability to nonlinear relationships.
However, these models still face challenges in effectively handling
temporal dependencies inherent in stock prices. Other approaches,
including Decision Trees and k-Nearest Neighbors (k-NN), have also been
utilized but often fall short in delivering reliable forecasts over longer time
horizons. Despite these advancements, accurately predicting stock prices
in real-time remains a significant challenge due to market volatility and
the influence of external factors.

Proposed Work
The proposed model for stock price forecasting leverages Long Short-Term
Memory (LSTM) networks, which are well-suited for handling sequential
data and capturing longterm dependencies. LSTMs address the
shortcomings of traditional forecasting methods by using memory cells
and gating mechanisms that allow the retention of relevant information
over time, making them effective for financial time series data with
complex patterns. By training the LSTM on historical stock price data, the
model can identify intricate trends that simpler models may miss. This
architecture enables it to predict future prices based on past performance
while accounting for both short-term fluctuations and long-term trends.
Additionally, the model adapts to changing market conditions, enhancing
its accuracy in real-time scenarios. To further boost performance, the
approach can incorporate external market indicators, trading volumes,
and macroeconomic factors, enriching the input data for the LSTM.
Overall, this LSTM-based model provides a sophisticated solution for stock
price forecasting, effectively addressing the challenges posed by
traditional methods and delivering valuable insights for investors and
traders.

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