Novel Stock Crisis Prediction Technique—A Study on Indian Stock Market

Abstract

A stock market crash is a drop in stock prices more than 10% across the major indices. Stock crisis prediction is a difficult task due to more volatility in the stock market. Stock price sell-offs are due to various reasons such as company earnings, geopolitical tension, financial crisis, and pandemic situations. Crisis prediction is a challenging task for researchers and investors. We proposed a stock crisis prediction model based on the Hybrid Feature Selection (HFS) technique. First, we proposed the HFS algorithm to removes the irrelevant financial parameters features of stock. The second is the Naive Bayes method is considered to classify the strong fundamental stock. The third is we have used the Relative Strength Index (RSI) method to find a bubble in stock price. The fourth is we have used moving average statistics to identify the crisis point in stock prices. The fifth is stock crisis prediction based on Extreme Gradient Boosting (XGBoost) and Deep Neural Network (DNN) regression method. The performance of the model is evaluated based on Mean Squared Error (MSE), Mean Absolute Error (MAE), and Root Mean Square Error(RMSE). HFS based XGBoost method was performed better than HFS based DNN method for predicting the stock crisis. The experiments considered the Indian datasets to carry out the task. In the future, the researchers can explore other technical indicators to predict the crisis point. There is more scope to improve and fine-tune the XGBoost method with a different optimizer.

Keywords

• Recursive feature elimination
• Boruta feature selection
• stock price bubble
• XGBoost
• DNN
• stock crisis