ANALYSIS OF STOCK PREDICTION USING MACHINE LEARNING

Submitted in partial fulfillment of the requirements

for the award of
Bachelor of Engineering degree in Computer Science and Engineering

by

V.G. JYOTHI PRIYA(37110301)

DEPARTMENT OF COMPUTER SCIENCE AND ENGINEERING

SCHOOL OF COMPUTING

SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
(DEEMED TO BE UNIVERSITY)
Accredited with Grade “A” by NAAC

JEPPIAAR NAGAR, RAJIV GANDHI SALAI,

CHENNAI – 600 119

MARCH-2021
 SATHYABAMA
INSTITUTE OF SCIENCE AND TECHNOLOGY
(DEEMED TO BE UNIVERSITY)
Accredited with “A” grade by NAAC
Jeppiaar nagar, Rajiv Gandhi Salai, Chennai– 600119
www.sathyabama.ac.in

DEPARTMENT OF COMPUTER SCIENCE AND ENGINEERING

BONAFIDE CERTIFICATE

This is to certify that this Project Report is the bonafide work of V.G.Jyothi Priya
(37110301) who carried out the project entitled “Analysis of stock prediction using
Machine Learning” under my supervision from November 2020 to April 2021.

Internal Guide

Dr. S. Jancy MCA., MBA., M.TECH., PH.D.

Head of the Department

Dr. S. VIGNESHWARI, M.E., Ph.D.
Dr. L. Lakshmanan, M.E., Ph.D.

Submitted for Viva voce Examination held on

Internal Examiner External Examiner

 DECLARATION

I V.G.JYOTHI PRIYA hereby declare that the Project Report entitled

“ANALYSIS OF STOCK PREDICTION USING MACHINE LEARNING”
done by me under the guidance of Dr. S. Jancy MCA., MBA., M.TECH., Ph.D.,
Department of Computer Science and Engineering and Sathyabama Institute of
Science and Technology is submitted in partial fulfillment of the requirements for the
award of Bachelor ofEngineering degree in Computer Science and Engineering.

DATE:

PLACE: CHENNAI SIGNATURE OF THE CANDIDATE

 ACKNOWLEDGEMENT

I am pleased to acknowledge my sincere thanks to Board of Management of

SATHYABAMA for their kind encouragement in doing this project and for
completing it successfully. I am grateful to them.

I convey my thanks to Dr. T. Sasikala, M.E., Ph.D., Dean, School of Computing and
Dr. L. Lakshmanan, M.E., Ph.D., and Dr. S. Vigneswari, M.E., Ph.D., Heads of the
Department of Computer Science and Engineering for providing me necessary
support and details at the right time during the progressive reviews.

I would like to express my sincere and deep sense of gratitude to my Project Guide
Dr. S. Jancy MCA., MBA., M.TECH., Ph.D. for his valuable guidance, suggestions
and constant encouragement paved way for the successful completion of my project
work.

I wish to express my thanks to all Teaching and Non-teaching staff members of the
Department of Computer Science and Engineering who were helpful in many ways
for the completion of the project.
 ABSTRACT

Predicting inventory marketplace prices is a compound task that typically includes

in covering human-computer interplay. Due to have a mutual courting or connection
nature of stock expenses, conventional batch processing methods can't be make
sensible and effective use for inventory market Evaluation. We advocate an
algorithm that make practical and effective use of a type of recurrent neural
community (RNN) called Long Short Term Memory (LSTM), wherein the weights
are adjust for single data factors the use of stochastic gradient descent. This will
offer greater accurate effects when in comparison to current inventory rate
prediction algorithms. The network will be drill and Assess from free for blunders
with diverse sizes of facts, and the results are arranged in tabular form. A
comparison with admire to accuracy is then accomplished in opposition to an
Artificial Neural Network.
 TABLE OF CONTENTS

Abstract v
List of figures 9
List of Abbreviations 10

CHAPTER NO TITLE
PAG
E NO

1. INTRODUCTION 1
EXISTING SYSTEM 5

PURPOSE OF PROJECT 6

PROPOSED SYSTEM
6
BATCH VERSUS ONLINE LEARNING
ALGORITHMS 6
LSTM 7

2. LITERATURE SURVEY 9
3. AIM AND SCOPE OF PRESENT
INVESTIGATION 12
AIM OF THE PROJECT 12

SCOPE AND OBJECTIVES 12

FUNCTIONAL AND NON-FUNCTIONAL

REQUIREMENTS 13
FUNCTIONAL REQUIREMENT 13

NON-FUNCTIONAL REQUIREMENT 14

4. SYSTEM DESIGN AND METHODOLOGY 16

SYSTEM ARCHITECTURE 16

RESEARCH DESIGN 17

PROBLEM FRAMING 17
4.2.2 ROBUST DESIGN 19

4.2.3 DATA PREPROCESSING 19

4.2.4 PREDICTION OUTPUT 20

4.2.5 MODEL 20

4.2.6 MODEL ARCHITECTURE AND HYPER

PARAMETER SEARCH WITH EVOLUTION 21
ALGORITHM
4.2.7 PERFORMANCE EVALUATION 23

4.2.7.1 MOTIVATION 23

4.2.7.2 MODEL ACCURACY SCORE 23

4.3 APPLICATION DESIGN 24

4.3.1 USER GROUPS 24

4.3.2 USER JOURNEY 25

4.3.3 UI/UX 27

4.3.3.1 PROGRESSIVE WEB APPLICATION

MOTIVATION 27
4.3.3.2 LAYOUT MOTIVATION 28

4.4 IMPLEMENTATION 31

4.4.1 RESEARCH IMPLEMENTATION 31

4.4.2 STOCK PRICE DATA 31

4.4.3 DATA PRE-PROCESSING 31

4.4.4 MODEL 32

4.4.5 TRAINING 33

4.4.6 SAVING TRAINED MODEL 33

4.4.7 PREDICTING STOCK PRICE 33

4.4.8 PERFORMANCE EVALUATION 34

4.4.9 MODEL SCORE, BUY/SELL SCORE 34

4.4.10 SAVE PREDICTIONS 34
5. RESULTS AND DISCUSSIONS 35
6. CONCLUSION AND FUTURE WORK 41
FUTURE WORK 42
REFERENCES 43
APPENDIX 46
PAPER WORK 50
PLAGIARISM CHECKER 55
 LIST OF FIGURES

FIGURE FIGURE NAME PAGE

NO NO

FIG-1 An LSTM memory cell 7

Fig 4.1 System Architecture diagram 16

Fig 4.2 Example of the common high-level 21

architecture of recurrent neural
networks.
Fig 4.3 Functionality accessible by normal 25
users and advanced users

Fig 4.4 User journey 25

 LIST OF ABBREVIATIONS

ABBREVIATIONS EXPANSIONS
KPI Key performance indicator

GDP Gross Domestic product

CPI Consumer Price Index

EMH Efficient Market Hypothesis

GA Genetic Algorithms

ANN’S Artificial Neural Networks

LSTM Long short term memory

RNN Recurrent Neural Network

RMSE Root Means Square Error

ESM Exponential Smoothing Model

AICBIC Akaike Information Criterion Bayesian

information criterion
GRU’S Gated Recurrent Unit’s

MPS Model Prediction Score

MDS Model Domestic Score

SPS Snake Prediction Scores

MAS Model Accuracy Score
 CHAPTER-1
INTRODUCTION

The stock marketplace is a Huge array of investors and sellers who

purchase and promote stock, push the price up or down. The costs of shares are
administered by means of the standards of hobby and deliver, and the inevitable
objective of buying shares is to bring in coins with the aid of buying stocks in groups
whose observe esteem (i.E., share price) is needed to rise. Financial exchanges are
firmly related with the universe of economic elements — the ascent and fall of offer
prices can be observed back to some Key Performance Indicators (KPI's). The 5
most usually utilized KPI's are the preliminary stock fee ('Open'), end of-day value
('Close'), intraday low cost ('Low'), intra-day top fee ('High'), and all out extent of
shares exchanged for the duration of the day ('Volume').
Dissemination and inventory expenses are mainly Dependent upon
suppositions the capacity to look approximately the monetary exchange. It is close
to tough to assume inventory costs to the T, inferable from the unpredictability of
components that assume a giant element inside the development of fees. Be that
as it may, it's miles achievable to motive an informed to evaluate of costs. Stock
costs never shift in separation: the improvement of one will in preferred have a
torrential slide impact on a few distinct shares too. This part of inventory value
improvement can be utilized as a sizable apparatus to foresee the expenses of
several stocks at once. Because of the continuous quantity of money protected and
wide variety of trades that happen each moment, there comes a trade something of
extensive worth among the precision and the quantity of forecasts made; all things
taken into consideration, maximum stock expectation frameworks are finished in a
conveyed, modify style. These are a portion of the contemplations and difficulties
regarded in financial alternate investigation.
Financial markets are one of the most fascinating inventions of our time. They have
had a significant impact on many areas like business, education, jobs, technology
and thus on the economy. Over the years, investors and researchers have been
interested in developing and testing models of stock price behaviour.

1
However, analysing stock market movements and price behaviours is extremely
challenging because of the markets dynamic, nonlinear, nonstationary,
nonparametric, noisy, and chaotic nature, stock markets are affected by many highly
interrelated factors that include economic, political, psychological, and company-
specific variables. Technical and fundamental analysis are the two main approaches
to analyse the financial markets. To invest in stocks and achieve high profits with
low risks, investors have used these two major approaches to make decisions in
financial markets.
fundamental analysis is mainly based on three essential aspects (i)
macroeconomic analysis such as Gross Domestic Product (GDP) and Consumer
Price Index (CPI) which analyses the effect of the macroeconomic environment on
the future profit of a company, (ii) industry analysis which estimates the value of the
company based on industry status and prospect, and (iii) company analysis which
analyses the current operation and financial status of a company to evaluate its
internal value. Different valuation approaches exist for fundamental Analysis. The
average growth approximation technique compares Stock-A with other stocks in the
same category to better understand valuations, i.e., assuming two companies have
the same growth rate, the one with the lower Price-to-Earnings (P/E) ratio is
considered to be better. Hence the fair price is the earnings times target P/E. The
P/E method is the most commonly used valuation method in the stock brokerage
industry. The constant growth approximation technique such as Gordon’s growth
model is one of the best-known classes of dividend discount models. It assumes
that dividends of a company will increase at a constant growth rate forever but less
than the discount rate. demonstrated the utility of fundamental analysis through the
use of financial ratios to separate good stocks from poor stocks. The authors
compared their one-year return against the benchmark—i.e., Nifty—which gives an
accuracy of 74.6%. This is one of the few papers which focus on using fundamental
features (i.e., company-specific ratios) to identify stocks for investments.
Furthermore, grouped the domains of technical analysis into
sentiment, flow-of-funds, raw data, trend, momentum, volume, cycle, and volatility.
Sentiment represents the behaviours of various market participants.

2
 Flow-of-funds is a type of indicator used to investigate the financial status of
various investors to pre-evaluate their strength in terms of buying and selling stocks,
then, corresponding strategies, such as short squeeze, can be adopted. Raw data
include stock price series and price patterns such as K-line diagrams and bar charts.
Trend and momentum are examples of price-based indicators, trend is used for
tracing the stock price trends while momentum is used to evaluate the velocity of
the price change and judge whether a trend reversal in stock price is about to occur.
Volume is an indicator that reflects the enthusiasm of both buyers and sellers for
investing, it is also a basis for predicting stock price movements. The cycle is based
on the theory that stock prices vary periodically in the form of a long cycle of more
than 10 years containing short cycles of a few days or weeks. Finally, volatility is
often used to investigate the fluctuation range of stock prices and to evaluate risk
and identify the level of support and resistance.
Sentiments can drive short-term market fluctuations which in turn cause
disconnects between the price and true value of a company’s shares but over long
periods of time, however, the weighing machine kicks in as a company’s
fundamentals ultimately cause the value and market price of its shares to converge.
A prominent example comes from the Nobel Laureate Robert Shiller, who showed
that stock prices are extremely volatile over the short term but somewhat predictable
by their price-to-earnings over long periods. She explained what returns to expect
from the stock markets considering the economic scenario and suggested that in
the future, returns could be substantially lower. Shiller (2000) also suggested that
stocks are overvalued, and the bubble will burst anytime. In the year 2000, rightly
so, we witnessed the dotcom bubble burst.
Stock market price prediction is a tricky thing. Several theories regarding
stock markets have been conceptualized over the years. They either try to explain
the nature of stock markets or try to explain whether the markets can be beaten.
One such popular and most debated theory given by Fama (1970) is the Efficient
Market Hypothesis (EMH) which states that at any point in time, the market price of
a stock incorporates all information about that stock. In other words, the stock is
accurately valued until something changes. There are three variants of EMH

3
(i) the weak form which is consistent with the random walk hypothesis, and that
stock prices move randomly while price changes are independent of each other
hence, it is not possible to beat the market by earning abnormal returns on the basis
of technical analysis; (ii) the semi-strong form which states that prices adjusted
rapidly according to market and public information such as dividend, earnings
announcements, and political or economic events, hence it is not possible to earn
abnormal returns on the basis of fundamental analysis; and, finally, (iii) the strong
form which states that prices reflect market, public, and private information as such
no investor has monopolistic access to information.
According to EMH, price changes are unpredictable and forecasting a
financial market is a hopeless effort. However, (Abu-Mostafa and Atiya 1996)
argued that the existence of so many price trends in financial markets and the
undiscounted serial correlations among fundamental events and economic figures
affecting the markets are two of many pieces of evidence against the EMH.
Researchers andInt. J. Financial Stud. 2019, 7, 26 3 of 22 investors disagree with
EMH both empirically and theoretically, thereby shifting the focus of discussion from
EMH to the behavioural and psychological aspects of market players (Naseer and
Tariq 2015). According to Zhong and Enke (2017), financial variables, such as stock
prices, stock market index values, and the prices of financial derivatives are
therefore thought to be predictable. Many widely accepted empirical studies show
that financial markets are to some extent predictable (Chong et al. 2017). Criticism
of EMH has given rise to an increasing number of studies that question the validity
of EMH and introduce new and successful approaches that combine technical
analysis indicators and chart patterns with methodologies from econometrics,
statistics, data mining, and artificial intelligence (Arévalo et al. 2017).
Many new technologies and methods have been proposed over the years to
try and predict stock prices via many avenues, thanks to the challenging and ever-
changing landscape of stock markets (Chen and Chen 2016). In this paper, we focus
on two topics, namely, stock analysis and stock prediction. We look at the research
in the past, but mainly focus on modern techniques, highlighting some of the main
challenges they pose and recent achievements for stock analysis and prediction.
Finally, we discuss potential challenges and possible future research directions.

4
We organize the rest of this paper as follows. Section 2 provides a background
review and taxonomy of the various approaches to stock market analysis. Section
3 describes a literature study on stock markets analysis and prediction. Section 4
discusses and compares the approaches mentioned in Section 3. Section 5
provides an overview of challenges and additional areas for future research. Finally,
Section 6 concludes the paper.

EXISTING SYSTEM:

Customary ways to deal with financial exchange investigation and stock value
expectation incorporate principal examination, which takes a gander at a
stock's previous exhibition and the overall believability of the actual
organization, and factual examination, which is exclusively worried about
calculating and distinguishing designs in stock value variety. The last is
generally accomplished with the assistance of Genetic Algorithms (GA) or
Artificial Neural Networks (ANN's), yet these neglect to catch relationship
between's stock costs as long haul worldly conditions. Another significant issue
with utilizing straightforward ANNs for stock expectation is the wonder of
detonating/disappearing gradient[4], where the loads of an enormous
organization either become excessively huge or excessively little (separately),
definitely easing back their union to the ideal worth. This is regularly brought
about by two variables: loads are introduced haphazardly, and the loads nearer
to the furthest limit of the organization additionally will in general change
significantly more than those toward the start. An elective way to deal with
securities exchange examination is to lessen the dimensionality of the
information [2] and apply include decision calculations to waitlist a center
arrangement of highlights (like GDP, oil value, expansion rate, and so on) that
greatestly affect stock costs or money trade rates across business sectors [10].
Notwithstanding, this strategy doesn't consider long haul exchanging
methodologies as it neglects to consider the whole history of patterns; besides,
there is no arrangement for exception identification.

5
 PURPOSE OF PROJECT:

The purpose of this project is to accurately predict the future closing value of a given
stock across a given period of time in the future. For this project I have used a Long
Short Term Memory networks – usually just called “LSTMs” to predict the closing
price of the S&P 500 using a dataset of past prices

 Achievements:
o Built a model to accurately predict the future closing price of a given
stock, using Long Short Term Memory Neural net algorithm.

o Achieved Mean Squared Error rating of just 0.00093063.

Things i have learnt by completing this project:

 How to apply deep learning techniques: Long Short Term Memory Neural
Network algorithms.
 How to use keras-tensorflow library.

 How to collect and preprocess given data.

 How to analyze model's performance.

 How to optimise Long Short Term Memory Neural Network algorithm, to

ensure increase in positive results.

PROPOSED SYSTEM

We propose an internet learning calculation for foreseeing the finish of-day cost of
a given stock (see Figure 2) with the assistance of Long Short Term Memory
(LSTM), a sort of Recurrent Neural Network (RNN).

BATCH VERSUS ONLINE LEARNING ALGORITHMS:

On the web and group learning calculations vary in the manner by which they
work.

6
In an online calculation, it is conceivable to stop the enhancement interaction in a
learning run and still train a compelling model. This is especially helpful for huge
informational indexes, (for example, stock cost datasets) when the intermingling can
be estimated and learning can be stopped early.

The stochastic learning worldview is unmistakably utilized for internet learning on

the grounds that the model is prepared on each information point — every boundary
update just uses a solitary haphazardly picked information point, and keeping in
mind that motions might be noticed, the loads at last merge to a similar ideal worth.
Then again, cluster calculations keep the framework loads consistent while figuring
the blunder related with each example in the information. That is, every boundary
update includes an output of the whole dataset — this can be profoundly tedious for
enormous assessed stock worth data. Speed and precision are correspondingly
huge inpredicting patterns in stock value development, where costs can vacillate
fiercely inside the range of a day. In that capacity, a web based learning approach
is better for stock value expectation.

LSTM

Fig - 1: An LSTM memory cell

7
LSTM's are an exceptional subset of RNN's that can get setting explicit otherworldly
compulsion for extensive stretches of time. Each LSTM neuron is a memory cell that
can store other data i.e., it keeps up its own cell state. While neurons in typical
RNN's just take in their past secret state and the current contribution to yield another
secret express, a LSTM neuron additionally takes in its old cell state and yields its
new cell state. A LSTM memory cell, as portary in Figure 1, has the accompanying
three segments, or doors:
1. FORGET GATE: The fail to remember door chooses when explicit parts of the
cell state are to be supplanted with later data. It yields esteems near 1 for parts of
the cell express that ought to be held, and zero for values that ought to be ignored.
2. INPUT GATE: In light of the information (i.e., past yield o(t-1), input x(t), and past
cell state c(t-1)), this part of the organization learns the conditions under which any
data ought to be put away (or refreshed) in the cell state.
3. OUTPUT GATE: contingent upon the information and cell express, this bit
chooses what data is proliferated forward (i.e., yield o(t) and cell state c(t)) to the
following hub in the organization.
Hence, LSTM networks are ideal for investigating what variety in one stock's
cost can mean for the costs of a few different stocks throughout a significant stretch
of time. They can likewise choose (in a powerful design) for how long data about
explicit past patterns in stock value development should be held to all the more
precisely foresee future patterns in the variety of stock costs.

8
 CHAPTER 2
LITERATURE SURVEY

The underlying focal point of our writing review was to investigate explicit internet
learning calculations and check whether they could be adjusted to our utilization
case i.e., dealing with continuous stock value information. These included Online
AUC Maximization, Online Transfer Learning, and Online Feature Selection.

In any case, as we couldn't locate any conceivable change of these for

stock value forecast, we at that point chose to take a gander at the current
frameworks, break down the significant downsides of the equivalent, and check
whether we could refine them. We focused in on the relationship between's stock
information (as unique, long haul worldly conditions between stock costs) as the
central point of interest that we wished to address. A short inquiry of conventional
answers for the above issue drove us to RNN's and LSTM.

In the wake of choosing to utilize a LSTM neural organization to perform

stock forecast, we Asked various papers to consider the idea of slant plunge and its
different kinds. We closed our writing study by seeing how incline drop can be
utilized to tune the loads of a LSTM organization and how this cycle can be can be
improve.

Numerous statistical techniques have been tried and tested for stock
market analysis and prediction. The Exponential Smoothing Model (ESM) is a
popular smoothing technique which is applied on time series data, it essentially uses
the exponential window function for smoothing time series data and analyse the
same (Billah et al. 2006). De Faria et al. (2009) compared the ANN and adaptive
ESM model for predicting the Brazilian stock indices. Their experiment revealed the
predictive power of ESM and the results for both methods show similar
performances although the neural network model

9
 i.e., the multilayer feedforward network slightly outperformed the adaptive
ESM in terms of the Root Means Square Error (RMSE). Dutta et al. (2012) took an
interesting path by selecting the financial ratios as independent variables for a
logistic regression model and then analysed the relationship between these ratios
and the stock performances.

The paper focused on a classification task for predicting companies which

are good or poor based on their one-year performance. The results show that the
financial ratios—like net sales, book value PE, price-to-book (P/B), EBITDA, etc.—
classify the companies into good and poor classes with an accuracy of 74.6%, which
is a good indication of why company health matters in stock analysis and prediction.

Devi et al. (2013) tried to address some issues not currently addressed in
most of the stock analysis literature, such as the dimensionality and expectancy of
a naïve investor.

The authors essentially utilize the historical data of four Indian midcap
companies for training the ARIMA model. The Akaike Information Criterion Bayesian
Information Criterion (AICBIC) test was applied to predict the accuracy of the model.
Testing the model on individual stocks and the Nifty 50 Index showed that the Nifty
Index is the way to go for naïve investors because of low error and volatility.
Ariyo et al. (2014) explore the extensive process of building ARIMA models.
To identify the optimal model out of all the ARIMA models generated, the authors
chose criteria like the standard error of regression, adjusted R-square, and Bayesian
information . The best ARIMA model, based on the above criteria, did a satisfactory
job in predicting the stock prices of Nokia and Zenith Bank.
10
 Furthermore, Ariyo et al. (2014) made a solid case not to undermine the
powers of ARIMA models in terms of stock analysis because it can compete
reasonably well against the emerging forecasting techniques available today for
short term prediction.

Bhuriya et al. (2017) implemented variants of regression models to predict

the stock price of Tata Consultancy Services stock based on five features i.e., open,
high, low, close price, and volume. The paper compares the performances of the
linear, polynomial, and Radial Basis Function (RBF) regression models based on
the confidence values of the predicted results.

In addition, Bhuriya et al. (2017) reported that the linear regression model
outperformed the other techniques and achieved a confidence value of 0.97.

11
 CHAPTER 3
AIM AND SCOPE OF PRESENT INVESTIGATION

AIM OF THE PROJECT:

In Stock Prediction, the aim is to predict the future value of the financial stocks
of a company. The recent trend in stock market prediction technologies is the use
of machine learning which makes predictions based on the values of current stock
market indices by training on their previous values. Machine learning itself employs
different models to make prediction easier and authentic. The paper focuses on the
use of Regression and LSTM based Machine learning to predict stock values.
Factors considered are open, close, low, high and volume.

SCOPE AND OBJECTIVES:

As a scope of this project, this research would like to perform a

comparative analysis with deep learning classifiers and extreme learning
classifiers with the help of a feature reduction algorithm based on the
parameters used for stock market prediction. Along with this, research would
also like to study and implement economic growth model for stock market
prediction and the analysis of how economic growth model will affect in stock
market prediction in comparison to the linear regression model and with
specialized machine learning techniques.

the objective of this study is to predict the future stock market prices in
comparison to the existing methodologies such as regression or continuous
learning and by modifying them with the current methodologies efficiently by
analyzing the recent trends of various researchers.

12
  In the current emerging competitive market, predicting the stock returns as
well as the company's financial status in advance will provide more benefits
for the investors in order to invest confidently.
 Stock prediction can be done by using the current and previous data available
on the market. Methods: The performance metrics that need to be attained
in case of stock prediction are accuracy, scalability and less time
consumption.
 There are many researches done so far in order to predict the stock market
to achieve the defined metrics.
 Many models have been available in the field of data mining for predicting
the stock market such as if-then-else rules, Artificial Neural Network (ANN),
Fuzzy systems, Bayesian algorithm and so on.

FUNCTIONAL AND NON-FUNCTIONAL REQUIREMENTS:

FUNCTIONAL REQUIREMENTS:

Requirement Analysis After the extensive analysis of the problems in the system,
we are familiarized with the requirement that the current system needs. The
requirement that the system needs is categorized into the functional and non-
functional requirements.

These requirements are listed below:

Functional Requirements Functional requirement are the functions or features that

must be included in any system to satisfy the business needs and be acceptable to
the users. Based on this, the functional requirements that the system must require
are as follows:

 The system should be able to generate an approximate share price.

 The system should collect accurate data from the NEPSE website in consistent
manner.

13
The prediction shall abide by the following functional requirements:

1. Prior to application of stock recommendations, the database is updated by the

latest values.
2. The charts and comparison of the companies would be done only on the latest
data stock market data.
3. The user is provided with a login, logging into which enables the user to view his
past stock purchases and future recommendations.
4. The user can look previous data Information which was collected.
5. Each user has a friend list and can also be recommended on their buying patterns.
6. The user can also be recommended on the basis of the trending stocks which
would require the data regarding the stocks

NON-FUNCTIONAL REQUIREMENTS: Non-functional requirement is a

description of features, characteristics and attribute of the system as well as any
constraints that may limit the boundaries of the proposed system. The non-
functional requirements are essentially based on the performance, information,
economy, control and security efficiency and services. Based on these the non-
functional requirements are as follows:

 The system should provide better accuracy.

 The system should have simple interface for users to use.
 To perform efficiently in short amount of time.

1. Reliability: The reliability of the product will be dependent on the accuracy of the
data, date of purchase, how much stock was purchased, high and low value range
as well as opening and closing figures. Also the stock data used in the training would
determine the reliability of the software.

2. Security: The user will only be able to access the website using his login details
and will not be able to access the computations happening at the back end.

14
3. Maintainability: The maintenance of the product would require training of the
software by recent data so that there commendations are up to date. The database
has to be updated with recent values.

4. Portability: The website is completely portable and the recommendations

completely trustworthy as the data is dynamically updated.

5. Interoperability: The interoperability of the website is very high because it

synchronize all the database with the wamp server

15
 CHAPTER 4
SYSTEM DESIGN AND METHODOLOGY
SYSTEM ARCHITECTURE
The architecture of the system follows a client-server model, where the
server and the client are loosely coupled.

Alpha
vantag
e

Data
Preprocessing Stock
prices

Preprocessor

Trainin
g
data

Model
s

Training by Train Pick best

and models and
evolution
optimize combine

Best
Model
s

Predicted Upper/lowe
Model stock r
scores price bounds
Prediction s
Display to Retail
investors Mobile Application

Fig 4.1: System Architecture diagram

16
 After relevant stock data are retrieved from the third-party data provider
through the cloud, the backend pre-processes the data and builds the models. After
that, predictions are made and the prediction results will be stored on another cloud,
which can be retrieved from the mobile application.

The advantages of the loosely coupled architecture include improved

scalability and ease of collaboration. The workload for the cloud which serves the
models and the one which serves the mobile application will be very different. One
cloud serves the model prediction results, which are simple text files; another cloud
serves the mobile application with a lot of rich user content such as images and
large UI libraries. Having two clouds to adapt to two different demand patterns is
more efficient, especially since cloud providers these days usually serve content on
demand.

Also, the separation allows different team members in the team to focus
on different parts after agreeing on a common interface. It speeds up development
as team members responsible for different parts of the system do not need to take
care of the underlying implementation details. Also, it is easier to swap out different
components, e.g. to replace the models the team could simply make changes to the
backend, while the frontend remains unaffected.

RESEARCH DESIGN

PROBLEM FRAMING

The problem of the project is set to predict the stock price for the next 10 business
days. “10 days” is chosen as the timeframe as short term price movements tend to
depend more on trend momentum and price pattern, while long term price
movements depend on the fundamentals of a stock (e.g. company management
capabilities, revenue model, market demand, macroeconomic factors, etc.).

17
The loss function of the training algorithm is the mean squared error of the 10
predicted stock prices. The training algorithm or optimizer is set to minimize its
value, and it serves as the basic performance metric for comparing different models.

Other scores are defined to provide more in-depth insights on a model predictability
performance and finance-domain-based comparisons between models for
investors.

Two different prediction approaches are mainly tested, predicting the stock prices
for the next 10 days directly and predicting the stock price of the next day 1 at a
time. It is suspected that the two different problem framing approaches will result in
different abstractions learned hence performance for different use-cases.

As different stocks have very different characteristics and the stock prices exhibit
different trends, individual models will be built for separate stocks.

For the project, S&P 500 stocks from different industries are selected. Multiple
factors are considered when picking the stocks, including stock price volatility, the
absolute magnitude of the price, the respective industries, company size, etc., and
stocks exhibiting different characteristics are picked. The stocks are listed as below:

-Alphabet Inc., GOOGL (Technology)

- Amazon.com Inc., AMZN (Technology)
- Apple Inc., APPL (Technology)
- AT&T Inc., T (Telecom Services)
- Boeing Co., BA (Industrials)
- Caterpillar Inc., CAT (Industrials)
- Facebook Inc., FB (Technology)
- General Electric Co, GE (Industrials)
- Harley-Davidson, Inc., HOG (Consumer Cyclical)
- Microsoft Inc., MSFT (Technology)
- Procter & Gamble Co, PG (Consumer Defensive)

18
 ROBUST DESIGN

For the research side, the system is designed to be as robust as possible

to facilitate model testing. Each model can be defined by a pair of model options
and input options, specifying the model configurations and the inputs it takes. This
accelerates the process of testing out different model and/or input configuration
combinations.

DATA PREPROCESSING

Raw stock price data is pre-processed before inputting into machine

learning models. Pre-processing includes transforming the raw data into a format
that models can take from and operate on, most likely feature matrix. It also attempts
to extract some features, financial-domain-specific especially, manually to improve
results, allowing the model to learn more abstractions.

Two key features are selected as the input. First is a fixed-length list of
some raw historical data like stock price and daily percentage change. The fixed
length chosen specifies the length of the historical period to look back from today
when predicting future stock prices. Referring to the principle of technical analysis,
as the stock price reflects all relevant information, a technical analyst would focus
on the trading pattern of the stock rather than the economic fundamentals and
company fundamentals. Therefore, by getting a period of historical stock prices as
the input for the training model, it could be a piece of useful information in finding
the trading patterns and hence predicting the trend of future stock prices. Given a
set lookback period, it is assumed that the price movement patterns that are
predictive would occur in the specified historical period.

The second feature input is arithmetic moving averages. As mentioned in 1.1,

one of the obvious approaches for retail investors to identify the trend of the market
is through moving averages.

19
With the robust system design, different period of moving averages could be used
as the input into the model for stock price prediction, for example, a set of 22, 50,
100, 200 days moving averages, which are commonly used by investors [13].

PREDICTION OUTPUT

As mentioned in 4.2.1, 2 different prediction approaches are tested, which will have
different outputs.

For 10-day predictions, there will be 10 output units, resulting in a one-dimensional

vector with 10 stock prices, where the i-th element represents the i-th day stock price
prediction.

For 1-day prediction, there will be 1 output unit which is the stock price in the
following day. The predicted stock price of will then be the input of the next
prediction, to predict the stock price in the second day, the process repeats until all
10 predictions are generated.

MODEL

Different common neural network models are tested, including dense neural
network, simple recurrent neural networks (RNNs), long short-term memory
networks (LSTMs) and gated recurrent unit networks (GRUs).

Different model architectures are tested by changing the number of hidden layers,
the number of hidden units per hidden layer, and the activation function or recurrent
activation function used in each hidden layer.

All recurrent neural networks, RNNs, LSTMs, and GRUs, are set to have the same
high-level architecture (Figure 2.2), a stack of recurrent layers by passing the full
output sequence to the next layer, followed by a stack of dense layers.

20
 140383245469904

gru_1: GRU

gru_2: GRU

Dense_1:
DENSE

Dense_2:
DENSE

Fig 4.2: Example of the common high-level architecture of recurrent neural

networks.

Linear Regression on features, as well as trend lines which interpolate the stock
prices next 10 days linearly, are also tested.

MODEL ARCHITECTURE AND HYPER PARAMETER SEARCH WITH

EVOLUTION ALGORITHM:

Designing neural network architecture is challenging, even for computer scientists,

researchers and machine learning experts. The team does not have the expertise
in designing innovative and suitable architectures that will fit the requirement. Given
the huge number of architecture types and hyper-parameters for each model, the
search space is basically infinite, so a brute-force approach with grid search would
not be practical.

Inspired by the paper [12], this project replicates the evolution algorithm in the
context of stock price prediction. The algorithm serves as a heuristic for architecture
search, using reasonable and affordable computing power to search for ideal
architectures.

21
The same evolution algorithm was used in the paper [12] to train large-scale image
classifiers. The following is the evolution algorithm used, and the corresponding
algorithm parameters are defined in Appendix E.

1. Create a population of size POPULATION_SIZE of random simple neural

networks.

2. Train all neural networks in the population.

3. Calculate the mean squared error on the test set for each trained neural network.

4. Randomly select 2 networks. Select the one with better performance (lower error)
as the parent network, and remove the one with a worse performance from the
population.

5. Mutate the parent network to generate a new network and add it to the population.

6. Train the new network.

7. Calculate the mean squared error of the new network on the test set.

8. Repeat steps 3 - 7 for ITERATIONS number of iterations.

Different mutations are used at each step to slowly evolve the population, for
example adding a dense layer, changing the number of units in a certain layer or
changing the learning rate. For a full mutation list, see Appendix D. In theory, it is
also possible to put the model inputs as a variable into the evolution algorithm, using
the algorithm to find the opincrease the search space .

22
 PERFORMANCE EVALUATION

MOTIVATION

As mentioned in 4.2.1, apart from the mean squared error that a model tries to
minimize, different finance-specific scores are introduced to evaluate and compare
performance of different models, namely model accuracy score, model trend score
and stock buy/sell score. The scores are also designed to convey useful and
meaningful messages to help investors understand a stock and make investment
decisions.

MODEL ACCURACY SCORE

The first indicator of the performance is the Model Accuracy Score (MAS). It
describes the accuracy of the price prediction regarding the actual price. It is a
weighted sum of Model Prediction Score (MPS) and Model Direction Score (MDS),
ranging in [0,1]. A variable α is declared to adjust the weighting between MPS and
MDS contributing to MAS. Its formula is defined below:

Model Accuracy Score(MAS) = ( 1 − α) ⋅ MPS + α ⋅ MDS

MPS is the average of Snake Prediction Scores (SPS). Each SPS is calculated by
the prediction error in each of the 10-day disjoint segments, where the error is
basically an average of the absolute relative change between the predicted prices
and the actual prices over the 10 days. It is defined that SPS is 0 If the error is larger
than the standard deviation of the stock, as the prediction would have no reference
value under this circumstance. If otherwise, a scoring concave upward function is
applied to scale the error to a range of [0,1] based on the standard deviation.

23
A concave upward function is applied because the marginal usefulness of the model
decreases with a marginal increase in error.

Model Prediction Score(MPS)=1 ÷ |�|∑|S| SPSi

Snake Prediction Score(SPS)
�� �≤� 1 10 �i
4
={(� − � ÷ �) � therewise
= �� = 1⎹
, �ℎ��� � 10 − 1|
Pi

Meanwhile, MDS is the average of Snake Direction Scores (SDS). Each SDS is
evaluated by the alignment of the prediction direction and the actual direction of the
stock trend in each of the 10-day disjoint segments. If the prediction has a different
direction with the actual direction, it means the prediction is giving a false trend
signal to the users. Thus, SDS is 0. Otherwise, SDS would be evaluated based on
the direction of the estimation error. In other words, if the prediction is
overestimated, SDS is 0.8. Otherwise, it is 1. It is because it is assumed that an
underestimated prediction means the model is more reserved and is better off than
an overestimating model.

APPLICATION DESIGN

USER GROUPS

Users are separated into two groups, normal users and advanced users. For users
that would like to know about the historical (test set) performance of a model and
more information behind the machine learning models like the architecture and
inputs, they can enable advanced user mode in the settings page to view those
details in each individual stock page.

24
 Bookmark
favourite
stock

View 10-days
predictions
and
upper/lower
bounds

View
buy/sell
score

View trend
score,
trend direction,
accuracy score,
and price
prediction

View historical
1
day/10 days
interval
Prediction

View model
details(parameter
s)

Fig 4.3: functionality accessible by normal users and advanced users

USER JOURNEY

Advance
Login Stock List Details d
details
FIG 4.4 User Journey

25
First of all, users need to login to use the system, as there will be customization
options for different users. Since users might not want to create a separate account
just for our application, it will more convenient if users can log in with their existing
social media accounts. In particular, Facebook login is a good option, since there
are over 2 billion users worldwide. Thus, it might be possible to reach a larger market
by adopting Facebook login. Only the very basic user information like the user name
will be collected by the system.

For normal users (advanced user mode disabled), after logging into the system, they
can view the stock list and search from it by stock name. After they find the stock
that they are interested in, they can bookmark the stock as a favorite stock for easier
access later. After selecting a stock, they can view 3 key information in the details
page.

First, the next 10-day predictions and the corresponding upper/lower bounds of the
pre-selected best model together with 3 months of historical stock prices.

Second, they can look at the buy/sell score to get an intuitive sense on whether the
stock is currently on an uptrend or downtrend based on the predictions.

Third, the user can view the individual trend score, predicted trend direction,
accuracy score, and predicted price movement for each individual prediction model.

For advanced users, apart from the 3 key information, they can view 2 additional
pieces of information for more in-depth insights, understanding and analysis.

26
First, they can toggle to view the historical predictions, which helps to evaluate the
trustworthiness of different models. There are 2 ways to view the historical prediction
performance. For 1-day historical prediction, it could let the user understand how
well the model could predict the next day stock price. For 10-days historical
prediction (defined as Snakes in 2.2.7.2), it could let the user understand 10 trials
of how well a model could predict the stock price in 10-day segments. Thus, this
information would help the user to get more information to determine whether the
model is relevant and accurate enough for their references.

The second additional information is the layers, hyperparameters and model inputs
configured for each individual machine learning model. This information would be
useful for them to understand the topology of the model.

All data, including stock prices, predictions, historical predictions and all scores will
be updated everyday to reflect the latest information and predictions, which allows
users to revisit their investment position.

UI/UX

PROGRESSIVE WEB APPLICATION MOTIVATION

The application is written as a progressive web application (PWA) [14] instead of a

native mobile application. The motivation behind this is that the application could be
inherently adapt to desktop and mobile usage. It would be more costly to create
native desktop and native mobile application separately. The web application can
also allow the system to keep only one centralized instance, where information only
has to be updated once without any duplicated effort.

27
A progressive web application is typically implemented as a single page application
[15], where pages do not reload entirely like a web page refresh. Instead, the web
application only uploads the components as needed as the users interact with the
application. It enables smoother, more app-like user experience.

LAYOUT MOTIVATION

The priority of information display should depend on the relevancy of such

information from the user’s point of view. In the stock list page, a “favorite” section
is placed above the “recent” section, and “others” are placed below the two (Figure
2.5 middle). This design considered the relevance of the individual stock in the user
perspective. Favorite stocks should have higher priority as these are their focused
stock that they are interested in or have owned shares. The “recent” section is
crucial as it provides quick access for the user to revisit their recent history and find
the stocks that are closely relevant to what they have been checking on recently.

Inside the stock details page, the stock name with its stock code has a significant
color and portion at the top of the display, and a gray colored industry tag is placed
above the stock name. When the user clicked on the stock name, the section will
expand to display a brief overview of the stock. This design can make the user
quickly recognize which stock they are checking on.

As the core component of the application is the predictions with upper and lower
bounds that provide insight for the retail investors to review the trend of the stock.
The chart is placed just below the stock name and being centered on the screen
whenever the page is loaded. This design let the user quickly review the prediction
trend and recognize whether the predicted trend would interest them to continue
checking out the stock or not.
28
The chart is also very important for the advanced users to cross-check whether the
predictions have reference value according to its past performance. The 10-day
interval historical prediction and 1-day interval historical prediction are plotted on
the chart along with the historical stock price when the user enabled such options,
this serves the purpose of letting the user know how well the model could predict
the trend in the past. The legend labels are placed on the top of the graph to make
it crystal clear what does each colour of the line represents. Regarding the Inter
activeness of the chart, the chart changes with the time frame that the user has
selected. When the user hovers on the line of the chart, actual values and its
corresponding legend label are displayed, the chart interface makes it easy for the
user to validate actual values and demonstrate trust for the flexibility of user able to
review on the historical performance of each model.

Following the chart, a buy/sell score is represented by a red-green gradient bar

indicating the trend of the stock. It summarizes all the available predictions provided
by different machine learning models. This provides a quick overview of the user to
evaluate the trend. As it serves as a weighted average according to the trend
prediction accuracy and the trend direction of each machine learning model, the red-
green gradient bar simplifies all the findings and summarizes such trend predictions
into an easy to interpret figure. The middle of the red-green gradient bar is coloured
as white because it means the stock does not have obvious direction according to
the consensus of the predictions of the machine learning models. The colour coding
makes it obvious for the user to recognize the information at a glance.

The table with checkbox layout is designed for showing detailed results of each
machine learning model. The user can correlate the model with its trend
predictability and accuracy. This information would be useful for advanced users to
evaluate which model topology or search algorithms are useful in providing insightful
predictions. Although the trend scores and accuracy scores calculated are in range
[0, 1], it is scaled to a 0 to 10 scoring scale, which allows easier understanding and
perception. The checkbox interface allows further interactivity with the

29
chart display. The user could compare and contrast the recent and historical
predictions of different machine learning models, and determine which of the
algorithm could be as of most useful according to their definition. The table allows
sorting according to trend score, trend prediction, accuracy score, and price
prediction. This allows the user to prioritize the information according to the metric
they would like to investigate. The table is sorted by the trend score in descending
order and the best model with highest trend score is pre-selected initially, as that is
presumed to be the first model that users care about.

For advanced users that have machine learning backgrounds, the application caters
to their needs to look at the layers, hyperparameters, and inputs of the machine
learning models. The model details page could provide insights for those users to
further investigate the prediction method on their own and let them understand the
underlying hypothesis of the machine learning model the application chose to
include.

To let the application be smarter and more consistent in terms of user experience,
user preferences, including whether a user is an advanced user and which historical
predictions to view, are saved on a cloud database, updated and retrieved whenever
the user logins and interacts with the preference settings.

A simple loading bar is also included for better user experience, as all data is get
from the cloud, and the loading time may vary among users depending on the
internet connection.

30
IMPLEMENTATION:

RESEARCH IMPLEMENTATION

All machine learning-related code are written in Python. Neural networks are
implemented with Keras while linear regression model is implemented with
scikit-learn.

STOCK PRICE DATA

Collection Data is collected from Alpha Vantage Stock Price API [18]. It offers up to
20 years of daily stock price information on S&P500 stocks. A Python script is written
to retrieve stock prices of different stocks automatically. The retrieved stock prices
are stored as .csv files in a local folder during development and testing. In
deployment, the downloaded stock price data will be transformed into a 2D
JavaScript array and uploaded to Firebase Cloud Storage immediately. A cron job
that launches the data-fetching and data-uploading script is scheduled to run every
8 p.m. (EDT) after NYSE and NASDAQ are closed.

DATA PRE-PROCESSING

3 Python scripts are written to transform the raw stock prices (.csv files) into feature
vectors, for training, predicting and testing respectively. The scripts take the input
options and the raw stock prices as inputs and produce the correct features by
building the lookback arrays and the moving averages. It concatenates the features
into the final feature vectors, which will be passed to the model for training or testing.
The 3 scripts share common operations in building a dataset except the output size
and the range of dates to build from, so common functions are written to centralize
the logic instead of repeating the same index-calculation-intensive work across
functions.

31
NumPy and Pandas are used to build the datasets. Numpy is a library that provides
effective n-dimensional array data structures as well as functions for array
manipulations. It is frequently used for machine learning tasks because it is much
for performant than Python lists, as Numpy arrays are implemented as densely
packed lists, instead of a dynamic array where the elements are not stored
contiguously.

Pandas is a popular framework for pre-processing time series data. It has various
utilities for reading raw input files such as .csv and transforming time series data to
the correct format. Pandas uses NumPy as the underlying data structure, so it is
very convenient to interoperate between the two.

MODEL

A model base class is used as a common interface for all machine learning models.
All models then have their own model class, specifying model-specific details like
methods to build the model, train the model, use the model and save the model.

To decouple model configurations from software code to provide flexibility and

robustness and save engineering effort, each model is defined by a JSON object,
which specifies the model’s architecture and hyper parameters with model options
and the model inputs with input options. A corresponding model can then be created
by passing the object to the model class constructor.

The model options specify which machine learning model to use, and the hyper
parameters for the model like the number of hidden layers, the number of hidden
units, activation functions used, as well as optimization algorithms and loss
functions. Some example model options are in Appendix A.

32
Apart from model configurations, the input can also vary, as there are many possible
features that could be added to or removed from the feature vectors. The input
options specify the features input that a model should expect, like the number of
previous stock prices as features and different moving averages. The input options
are related to a model in terms of the input format. All neural networks built in Keras
requires the input tensor shape for layer shape inference during model building, a
Python function is written to calculate the input shape for a given input option. Some
example input options are in Appendix B.

TRAINING

In training, a randomized initial model is first generated from the model options
definition. A training set is generated by the build training dataset script, which
generates the training set features from the input options and the raw stock price
data. Then, the data is fed into the model for training.

SAVING TRAINED MODEL

All trained models are saved for predicting stock prices in the future. Keras models
are saved in h5 format, and scikit-learn models are saved with a Python library
named pickle. A dedicated saving format is designed (Appendix C), such that same
models (same hash for same model options and input options) for different stocks
are saved in the same directory with no collision.

PREDICTING STOCK PRICE

When predicting stock price, the saved model will first be loaded. Then, a feature
vector specified by the input options is built with the build predict dataset script,
which is the same as the build training dataset except it returns a flatten 1D feature
vector.

33
The feature vector is inputted into the model to predict stock price. For 10-day
predict, the predictions are directly outputted. For 1-day predict, the predicted stock
price is appended to the raw dataset as if it happened before, then a new feature
vector is generated for predicting the stock price for the day after, the process is
repeated to predict the stock prices for all next 10 days.

PERFORMANCE EVALUATION

Each model is evaluated on the test set. A test set can be generated by the build
test dataset script, which could generate either a full test set for predicting the last
100 days stock price in 1-day or 10-day disjoint intervals.

MODEL SCORE, BUY/SELL SCORE

Functions are written to calculate different scores for users, 1 for calculating model
trend score, 1 for model accuracy score, and 1 for buy/sell score. For parts that
share the same calculation just with different offsets, helper functions are written to
separate the main calculation function from the repeating steps.

SAVE PREDICTIONS

For each stock, a prediction file can be generated from the save predictions script.
It includes all the data and results that the application needs to display, including all
10-day predictions from all models, both 1-day predict test set and snakes test, and
the model options and input options for each model. The saved predictions file is
then saved to Firebase Cloud Storage and served to the application. During
development, the saved predictions file is saved in a local directory.

34
 CHAPTER 5
RESULTS AND DISCUSSIONS

It shows the actual and the predicted closing stock price of the company Alcoa Corp,
a large-sized stock. The model was trained with a batch size of 512 and 50 epochs,
and the predictions made closely matched the actual stock prices, as observed in
the graph.It predicted closing stock price of the company Dixon Hughes Goodman
Corp, a smallsized stock. The model was trained with a batch size of 32 and 50
epochs, and while the predictions made were fairly accurate at the beginning,
variations were observed after some time.We can thus infer from the results that in
general, the prediction accuracy of the LSTM model improves with increase in the
size of the dataset.

35
36
37
38
39
40
 CHAPTER 6
CONCLUSION AND FUTURE WORK

The aftereffects of examination between Long Short Term Memory (LSTM) and
Artificial Neural Network (ANN) show that LSTM features a preferred forecast truth
over ANN. Financial exchanges square measure troublesome to screen and need
loads of setting once trying to decipher the event and foresee costs. In ANN, every
secret hub is simply a hub with a solitary enactment work, whereas in LSTM, each
hub could be a memory cell that may store contextual knowledge. consequently,
LSTMs perform higher as they will monitor the setting express transient conditions
between stock costs for a a lot of drawn out timeframe whereas performing arts
forecasts. An investigation of the outcomes likewise demonstrates that the 2 models
provide higher preciseness once the scale of the dataset increments. With a lot of
data, a lot of examples are often full-clad by the model, and therefore the a lot of the
layers are often higher modified. At its core, the securities market could be a
reflection of human emotions. Pure calculation and analysis have their limitations; a
attainable extension of this stock prediction system would be to enhance it with a
news feed analysis from social media platforms like Twitter, wherever emotions
square measure gauged from the articles. This sentiment analysis are often
connected with the LSTM to raised train weights and additional improve accuracy.

Financial markets provide a unique platform for trading and investing, where trades
can be executed from any device that can connect to the Internet. With the advent
of stock markets, people have the opportunity to have multiple avenues to make
their investment grow. Not only that, but it also gave rise to different types of funds
like mutual funds, hedge funds and index funds for people and institutions to invest
money according to their risk appetite. Governments of most countries invest a part
of their healthcare, employment, or retirement funds into stock markets to achieve
better returns for everyone.

41
Online trading services have already revolutionised the way people buy and sell
stocks. The financial markets have evolved rapidly into a strong and interconnected
global marketplace. These advancements bring forth new opportunities and the data
science techniques offer many advantages, but they also pose a whole set of new
challenges. In this paper, we propose a taxonomy of computational approaches to
stock market analysis and prediction, present a detailed literature study of the state-
of-the-art algorithms and methods that are commonly applied to stock market
prediction, and discuss some of the continuing challenges in this area that require
more attention and provide opportunities for future development and research.
Unlike traditional systems, stock market today are built using a combination of
different technologies, such as machine learning, expert systems, and big data
which communicate with one another to facilitate more informed decisions. At the
same time, global user connectivity on the internet has rendered the stock market
susceptible to customer sentiments, less stable due to developing news, and prone
to malicious attacks. This is where further research can play an important role in
paving the way how stock markets will be analysed and made more robust in the
future. A promising research direction is to explore various algorithms to evaluate
whether they are powerful enough to predict for the longer term, because markets
act like weighing machines in the long run having less noise and more predictability.
Hybrid approaches that combine statistical and machine learning techniques will
probably prove to be more useful for stock prediction.

FUTURE WORK:

More work on refining key phrases extraction will definitely produce better results.
Enhancements in the preprocessor unit of this system will help in improving more
accurate predictability in stock market.
 Twitter feeds message board, Extracting RSS feeds and news.
 Considering internal factors of the company likes Sales, Assets etc.

42
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69.

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APPENDIX:

#Import the libraries

import math
import pandas_datareader as web
import numpy as np
import pandas as pd
from sklearn.preprocessing import MinMaxScaler
from keras.models import Sequential
from keras.layers import Dense, LSTM
import matplotlib.pyplot as plt
plt.style.use('fivethirtyeight')
#Get the stock quote
df = web.DataReader('AAPL', data_source='yahoo', start='2012-01-
01', end='2019-12-17')
#Show teh data
Df
#Get the number of rows and columns in the data set
df.shape
#Visualize the closing price history
plt.figure(figsize=(16,8))
plt.title('Close Price History')
plt.plot(df['Close'])
plt.xlabel('Data', fontsize=18)
plt.ylabel('Close Price USD ($)', fontsize=18)
plt.show()
#Create a new dataframe with only the Close column
data = df.filter(['Close'])
#Convert the dataframe to a numpy array
dataset = data.values

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#Get the number of rows to train the model on
training_data_len = math.ceil(len(dataset) * .8 )
training_data_len
#Scale the data
scaler = MinMaxScaler(feature_range=(0,1))
scaled_data = scaler.fit_transform(dataset)
scaled_data
#Create the training data set
#Create the scaled training data set
train_data = scaled_data[0:training_data_len , :]
#Split the data into x_train and y_train data sets
x_train = []
y_train = []
for i in range(60, len(train_data)):
x_train.append(train_data[i-60:i, 0])
y_train.append(train_data[i, 0])
if i<= 60:
print(x_train)
print(y_train)
print()
#Convert the x_train and y_train to numpy arrays
x_train, y_train = np.array(x_train), np.array(y_train)
#Reshape the data
x_train = np.reshape(x_train, (x_train.shape[0], x_train.shape[1], 1))
x_train.shape
#Build the LSTM model
model = Sequential()
model.add(LSTM(50, return_sequences=True, input_shape= (x_train.shape[1],1)))
model.add(LSTM(50, return_sequences= False))
model.add(Dense(25))
model.add(Dense(1))

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#Compile the model
model.compile(optimizer='adam' , loss='mean_squared_error')
#Train the model
model.fit(x_train, y_train,batch_size=1, epochs=1)
#Create the testing data set
#Create a new array containing scaled values from index 1543 to 2003
test_data = scaled_data [training_data_len - 60:]
#Create the data sets x_test and y_test
x_test = []
y_test = dataset[training_data_len:]
for i in range(60, len(test_data)):
x_test.append(test_data[i-60:i, 0])
#Convert the data to a numpy array
x_test = np.array(x_test)
#Reshape the data
x_test = np.reshape(x_test, (x_test.shape[0], x_test.shape[1], 1))
#Get the models predicted price values
predictions = model.predict(x_test)
predictions = scaler.inverse_transform(predictions)
#Get the root mean squared error (RMSE)
rmse = np.sqrt( np.mean( predictions - y_test )**2 )
rmse
#Plot the data
train = data[:training_data_len]
valid = data[training_data_len:]
valid['Predictions'] = predictions
#Visualize the data
plt.figure(figsize=(16,8))
plt.title('Model')
plt.xlabel('Data', fontsize=18)

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plt.ylabel('Close Price USD ($)', fontsize=18)
plt.plot(train['Close'])
plt.plot(valid[['Close','Predictions']])
plt.legend(['Train','Val','Predictions'],loc='lower right')
plt.show(
#Show the valid and predicted prices
valid
#Get the quote
apple_quote = web.DataReader('AAPL',data_source='yahoo', start='2012-01-
01', end='2019-12-17')
#Create a new dataframe
new_df = apple_quote.filter(['Close'])
#Get teh last 60 day closing price values and convert the dataframe to a array
last_60_days = new_df[-60:].values
#Scale the data to be values between 0 and 1
last_60_days_scaled = scaler.transform(last_60_days)
#Create an empty list
X_test = []
#Append teh past 60 days
X_test.append(last_60_days_scaled)
#Convert the X_test data set to a numpy array
X_test = np.array(X_test)
#Reshape the data
X_test = np.reshape(X_test, (X_test.shape[0], X_test.shape[1],1))
#Get the predicted scaled price
pred_price = model.predict(X_test)
#undo the scaling
pred_price = scaler.inverse_transform(pred_price)
print(pred_price)
#Get the quote
apple_quote2 = web.DataReader('AAPL', data_source='yahoo',start='2019-12-
18', end='2019-12-18')
print(apple_quote2['Close'])
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