Stock Market Prediction from WSJ: Text Mining via Sparse Matrix Factorization

Felix Ming, Fai Wong, Zhenming Liu, Mung Chiang

Research output: Chapter in Book/Report/Conference proceedingConference contribution

23 Scopus citations

Abstract

We revisit the problem of predicting directional movements of stock prices based on news articles: here our algorithm uses daily articles from The Wall Street Journal to predict the closing stock prices on the same day. We propose a unified latent space model to characterize the 'co-movements' between stock prices and news articles. Unlike many existing approaches, our new model is able to simultaneously leverage the correlations: (a) among stock prices, (b) among news articles, and (c) between stock prices and news articles. Thus, our model is able to make daily predictions on more than 500 stocks (most of which are not even mentioned in any news article) while having low complexity. We carry out extensive back testing on trading strategies based on our algorithm. The result shows that our model has substantially better accuracy rate (55.7%) compared to many widely used algorithms. The return (56%) and Sharpe ratio due to a trading strategy based on our model are also much higher than baseline indices.

Original languageEnglish (US)
Title of host publicationProceedings - 14th IEEE International Conference on Data Mining, ICDM 2014
EditorsRavi Kumar, Hannu Toivonen, Jian Pei, Joshua Zhexue Huang, Xindong Wu
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages430-439
Number of pages10
EditionJanuary
ISBN (Electronic)9781479943029
DOIs
StatePublished - Jan 1 2014
Event14th IEEE International Conference on Data Mining, ICDM 2014 - Shenzhen, China
Duration: Dec 14 2014Dec 17 2014

Publication series

NameProceedings - IEEE International Conference on Data Mining, ICDM
NumberJanuary
Volume2015-January
ISSN (Print)1550-4786

Other

Other14th IEEE International Conference on Data Mining, ICDM 2014
CountryChina
CityShenzhen
Period12/14/1412/17/14

All Science Journal Classification (ASJC) codes

  • Engineering(all)

Keywords

  • computational finance
  • sparse optimization
  • text mining

Fingerprint Dive into the research topics of 'Stock Market Prediction from WSJ: Text Mining via Sparse Matrix Factorization'. Together they form a unique fingerprint.

Cite this