Data mining based on regularized convolutional neural network for time series: Financial prediction algorithm

This thesis aims to design a generalizable distance-based moving average (DBEMA) method for predicting time series. In our study, we focused on a specific area of financial time series. In order to increase the performance of prediction accuracy, DBEMA was combined with features selected by Recursive Feature Elimination (RFE) by using Classification and Regression Tree (CART) estimators and sequential feature selection (SFS) by using Gradient Boosting Machine (GBM). Although many artificial neural networks (ANNs) have been applied to a number of time series predictions and modelling, convolutional neural networks (CNN) have not been used much for time series prediction directly in literature and are still open to improvement. For predicting the trend of time series with DBEMA, time series are defined in the form of different time-lagged moving average patterns to identify the relations between each of them. The distances between moving averages (MA) and changes in their positions towards each other are examined for predicting future trends of time series. First of all, time series are defined so as to cover different time lags of 9 days, 50 days and 200 days in exponential moving average (EMA) forms and the distances between each of them and positions between each of them are marked. To improve the performance of the distance-based moving average method, CART and GBM algorithms are used for selecting better financial features in with RFE and SFS models, respectively. The combination of distance-based features and selected financial features are converted into 2-D images which are then classified by CNN. According to the experimental results, the proposed algorithm, CNN-DBEMA, outperforms other classification techniques in literature. Key Words: Distance-Based Features, Moving Average, Financial Time series Prediction, Convolutional Neural Network