Stock Portfolio Optimization Using a Deep Learning LSTM Model

Abstract

Predicting future stock prices and their movement patterns is a complex problem. Hence, building a portfolio of capital assets using the predicted prices to achieve the optimization between its return and risk is an even more difficult task. This work has carried out an analysis of the time series of the historical prices of the top five stocks from the nine different sectors of the Indian stock market from January 1, 2016, to December 31, 2020. Optimum portfolios are built for each of these sectors. For predicting future stock prices, a long-and-short-term memory (LSTM) model is also designed and fine-tuned. After five months of the portfolio construction, the actual and the predicted returns and risks of each portfolio are computed. The predicted and the actual returns of each portfolio are found to be high, indicating the high precision of the LSTM model.

arXiv commentThis is the accepted version of our paper in the international conference, IEEE Mysurucon'21, which was organized in Hassan, Karnataka, India from October 24, 2021 to October 25, 2021. The paper is 9 pages long, and it contains 19 figures and 19 tables. This is the preprint of the conference paper

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• Design and Analysis of Optimized Portfolios for Selected Sectors of the Indian Stock Market
• A Comparative Study of Hierarchical Risk Parity Portfolio and Eigen Portfolio on the NIFTY 50 Stocks
• Designing Efficient Pair-Trading Strategies Using Cointegration for the Indian Stock Market