Simulation and Assessment of Stock Market Forecasting Using Machine Learning Methodology

Abstract

This paper explores the application of neural network-based machine learning methodologies for stock market forecasting, an area of significant interest due to its potential to yield high returns. The study employs deep learning models, particularly Long Short-Term Memory (LSTM) networks, recognized for their ability to process time series data and capture temporal dependencies that are crucial in understanding stock market behaviors. The methodology involves collecting extensive historical stock price data, including open, close, high, low prices, and volume traded. This data is preprocessed to normalize the values and convert them into a format suitable for LSTM networks. The neural network architecture is designed with multiple layers, including dropout layers to prevent overfitting, and is trained on a substantial dataset to predict future stock prices based on past patterns. The performance of the LSTM model is evaluated using metrics such as root mean squared error (RMSE) and mean absolute error (MAE), comparing its predictive accuracy with traditional statistical methods and simpler machine learning models. The results indicate that LSTM networks can significantly improve the accuracy of stock market forecasts, demonstrating the model's efficacy in capturing complex stock price movements and providing a reliable tool for investors and financial analysts. The study not only confirms the viability of using sophisticated machine learning techniques in financial markets but also opens avenues for further research into neural network optimizations for enhanced predictive performance.