Long Short-Term Memory Recurrent Neural Network for Predicting the Return of Rate Underframe the Fama-French 5 Factor
The multifactor approach helps determine the linear connection between a diversified portfolio’s return and risk; however, the efficacy of the model models is still limited in the experiment. Algorithms in machine learning have recently grown in popularity to compensate for some of the shortcomings...
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| Format: | Article |
| Language: | English |
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Wiley
2022-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2022/3936122 |
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| _version_ | 1832545896777121792 |
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| author | Bui Thanh Khoa Tran Trong Huynh |
| author_facet | Bui Thanh Khoa Tran Trong Huynh |
| author_sort | Bui Thanh Khoa |
| collection | DOAJ |
| description | The multifactor approach helps determine the linear connection between a diversified portfolio’s return and risk; however, the efficacy of the model models is still limited in the experiment. Algorithms in machine learning have recently grown in popularity to compensate for some of the shortcomings of theoretical models. This study applied a machine learning technique to compare the performance of the Fama-French 5-factor model (FF5). Two approaches are employed in the Fama-French model: Long Short Term Memory Recurrent Neural Network (LSTM-RNN) and Maximum Likelihood Estimation (MLE). From January 1, 2010, through March 3, 2022, the stock market in Ho Chi Minh City was experimentally researched. The rolling window approach is used in combination with the Root Mean Square Error (RMSE), and the results of the FF5 model with the LSTM-RNN algorithm are more efficient in prediction error than the MLE methodology. This contribution encourages investors and hedge fund managers to use the LSTM-RNN algorithm to boost forecasting efficiency. |
| format | Article |
| id | doaj-art-fd1142fb872e4b5ebdffbfb61fbe949d |
| institution | Kabale University |
| issn | 1607-887X |
| language | English |
| publishDate | 2022-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-fd1142fb872e4b5ebdffbfb61fbe949d2025-02-03T07:24:27ZengWileyDiscrete Dynamics in Nature and Society1607-887X2022-01-01202210.1155/2022/3936122Long Short-Term Memory Recurrent Neural Network for Predicting the Return of Rate Underframe the Fama-French 5 FactorBui Thanh Khoa0Tran Trong Huynh1FinanceFPT UniversityThe multifactor approach helps determine the linear connection between a diversified portfolio’s return and risk; however, the efficacy of the model models is still limited in the experiment. Algorithms in machine learning have recently grown in popularity to compensate for some of the shortcomings of theoretical models. This study applied a machine learning technique to compare the performance of the Fama-French 5-factor model (FF5). Two approaches are employed in the Fama-French model: Long Short Term Memory Recurrent Neural Network (LSTM-RNN) and Maximum Likelihood Estimation (MLE). From January 1, 2010, through March 3, 2022, the stock market in Ho Chi Minh City was experimentally researched. The rolling window approach is used in combination with the Root Mean Square Error (RMSE), and the results of the FF5 model with the LSTM-RNN algorithm are more efficient in prediction error than the MLE methodology. This contribution encourages investors and hedge fund managers to use the LSTM-RNN algorithm to boost forecasting efficiency.http://dx.doi.org/10.1155/2022/3936122 |
| spellingShingle | Bui Thanh Khoa Tran Trong Huynh Long Short-Term Memory Recurrent Neural Network for Predicting the Return of Rate Underframe the Fama-French 5 Factor Discrete Dynamics in Nature and Society |
| title | Long Short-Term Memory Recurrent Neural Network for Predicting the Return of Rate Underframe the Fama-French 5 Factor |
| title_full | Long Short-Term Memory Recurrent Neural Network for Predicting the Return of Rate Underframe the Fama-French 5 Factor |
| title_fullStr | Long Short-Term Memory Recurrent Neural Network for Predicting the Return of Rate Underframe the Fama-French 5 Factor |
| title_full_unstemmed | Long Short-Term Memory Recurrent Neural Network for Predicting the Return of Rate Underframe the Fama-French 5 Factor |
| title_short | Long Short-Term Memory Recurrent Neural Network for Predicting the Return of Rate Underframe the Fama-French 5 Factor |
| title_sort | long short term memory recurrent neural network for predicting the return of rate underframe the fama french 5 factor |
| url | http://dx.doi.org/10.1155/2022/3936122 |
| work_keys_str_mv | AT buithanhkhoa longshorttermmemoryrecurrentneuralnetworkforpredictingthereturnofrateunderframethefamafrench5factor AT trantronghuynh longshorttermmemoryrecurrentneuralnetworkforpredictingthereturnofrateunderframethefamafrench5factor |