Integrating Independent Component Analysis and Principal Component Analysis with Neural Network to Predict Chinese Stock Market

Haifan Liu and Jun Wang

Mathematical Problems in Engineering, 2011, vol. 2011, 1-15

Abstract:

We investigate the statistical behaviors of Chinese stock market fluctuations by independent component analysis. The independent component analysis (ICA) method is integrated into the neural network model. The proposed approach uses ICA method to analyze the input data of neural network and can obtain the latent independent components (ICs). After analyzing and removing the IC that represents noise, the rest of ICs are used as the input of neural network. In order to forect the fluctuations of Chinese stock market, the data of Shanghai Composite Index is selected and analyzed, and we compare the forecasting performance of the proposed model with those of common BP model integrating principal component analysis (PCA) and single BP model. Experimental results show that the proposed model outperforms the other two models no matter in relatively small or relatively large sample, and the performance of BP model integrating PCA is closer to that of the proposed model in relatively large sample. Further, the prediction results on the points where the prices fluctuate violently by the above three models relatively deviate from the corresponding real market data.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:382659

DOI: 10.1155/2011/382659

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