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Evaluation of Alternative Approaches in Classification Algorithms for Prediction of Stock Market Index: Case of Crobex

Evaluation of Alternative Approaches in Classification Algorithms for Prediction of Stock Market Index: Case of Crobex
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Author(s): Silvija Vlah Jerić (Faculty of Economics and Business, University of Zagreb, Croatia)
Copyright: 2021
Pages: 18
Source title: Recent Applications of Financial Risk Modelling and Portfolio Management
Source Author(s)/Editor(s): Tihana Škrinjarić (University of Zagreb, Croatia), Mirjana Čižmešija (University of Zagreb, Croatia)and Bryan Christiansen (Global Training Group, Ltd, UK)
DOI: 10.4018/978-1-7998-5083-0.ch010

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Abstract

This chapter tackles the problem of automatic recognition of favorable days for intra-day trading. The problem is modeled as a binary classification problem, and several approaches are tested for solving it. Croatian stock index CROBEX data is used and 22 technical indicators are calculated as predictor variables. Performance of five classifiers is evaluated and compared by using Cohen's kappa as evaluation metric: artificial neural network, support network machine, random forest, k-nearest neighbors, and naïve Bayes classifier. The results give insight to effectiveness of technical analysis in predicting the day favorability for CROBEX index and suggest that technical analysis makes sense and might work for this case.

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