A system to predict the S&P 500 using a bio-inspired algorithm

The goal of this research was to develop an algorithmic system capable of predicting the directional trend of the S&P 500 financial index. The approach I have taken was inspired by the biology of the human retina. Extensive research has been published attempting to predict different financial markets using historical data, testing on an in-sample and trend basis with many employing sophisticated mathematical techniques. In reviewing and evaluating these in-sample methodologies, it became evident that this approach was unable to achieve sufficiently reliable prediction performance for commercial exploitation. For these reasons, I moved to an out-of-sample strategy and am able to predict tomorrow’s (t+1) directional trend of the S&P 500 at 55.1%. The key elements that underpin my bio-inspired out-of-sample system are: Identification of 51 financial market data (FMD) inputs, including other indices, currency pairs, swap rates, that affect the 500 component companies of the S&P 500. The use of an extensive historical data set, comprising the actual daily closing prices of the chosen 51 FMD inputs and S&P 500. The ability to compute this large data set in a time frame of less than 24 hours. The data set was fed into a linear regression algorithm to determine the predicted value of tomorrow’s (t+1) S&P 500 closing price. This process was initially carried out in MatLab which proved the concept of my approach, but (3) above was not met. In order to successfully meet the requirement of handling such a large data set to complete the prediction target on time, I decided to adopt a novel graphics processing unit (GPU) based computational architecture. Through extensive optimisation of my GPU engine, I was able to achieve a sufficient speed up of 150x to meet (3). In achieving my optimum directional trend of 55.1%, an extensive range of tests exploring a number of trade offs were carried out using an 8 year data set. The results I have obtained will form the basis of a commercial investment fund. It should be noted that my algorithm uses financial data of the past 60-days, and as such would not be able to predict rapid market changes such as a stock market crash.

Grantor dc:publisher

Oxford Brookes University

Year dc:date

2014

Author dc:creator

• Regan, Andrew J.

Contributors dc:contributor

• Hayatleh, Khaled
• Lidgey, John
• Toumazou, Chris

Statement dc:rights

• All rights reserved

Language dc:language

en

DOI dc:identifier

https://doi.org/10.24384/3tmn-6e06

OAI identifier oai:identifier

tle:942a6461-b62f-4a9a-945b-f6d6e9adbd3d:d6bd9758-527a-46cd-bfe2-c433766e8fca:1