Price predicting with LSTM artificial neural network and portfolio selection model of financial assets and digital currencies
Subject Areas : Financial engineeringFaranak Khonsarian 1 , Babak teimourpour 2 , Mohammad Ali Rastegar 3
1 - Department of Information Technology Engineering, Faculty of Industrial and Systems Engineering, Tarbiat Modares University, Tehran, Iran
2 - Department of Information Technology Engineering, Faculty of Industrial and Systems Engineering, Tarbiat Modares University, Tehran, Iran
3 - Financial Engineering Group, Industrial & Systems Engineering, Tarbiat Modares University, Tehran, Iran
Keywords: Portfolio, Financial Assets, Digital currency, Price prediction, LSTM neural network,
Abstract :
Finding solutions for price prediction, forming an optimal portfolio and achieving more profit are the basic goals of financial market activists. The purpose of this research is to predict the price of financial assets such as several stocks, gold, coin and a number of digital currencies using the LSTM neural network model and then form an optimal portfolio by calculating the rate of return, risk and the Sharpe ratio. The data used is from the archives of the Tehran Stock Exchange website, the website of the gold, coin and currency information network, as well as the website of buying and selling digital currencies. The time series of the prices of the investigated assets is between 2017 and 2020. Also, we used Python programming language and Gephi software to build the model and analyze the data. In the end, it was found that the LSTM neural network model is capable of predicting the price of financial assets with a very low error rate in each asset, and according to the Sharpe ratio obtained for each financial asset and the correlation matrix, Vebank stock, Khbahman 1 stock, and Digital currencies TRON, Tether and Bitcoin allocate more shares in the proposed portfolio.
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