Assessing the Predictive Power of Transformers, ARIMA, and LSTM in Forecasting Stock Prices of Moroccan Credit Companies

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

The authors employ three established forecasting methods to predict the stock prices of credit companies on the Moroccan stock exchange. The paper addresses an interesting topic and is well-aligned with the journal's scope. However, it exhibits significant flaws that must be addressed before it can be considered for publication in the MDPI’s Risk and Financial Management journal. Below, I provide detailed comments for the authors, encompassing serious concerns and suggestions for improvement. Consequently, I recommend a major revision of the paper so that the authors can address these comments.

1) The title of the paper doesn’t accurately reflect its content. Although titled as predicting credit company performance (related to company revenues or profits), the paper actually forecasts the stock prices of credit companies. The title must be revised to more accurately reflect the focus of the paper.

2) The abstract must be streamlined, eliminating lengthy details. It should also adopt a structured format within a single paragraph, for example: (i) background, (ii) scope and methodology, and (iii) results, conclusions, and contributions to the literature. The sections of the abstract should be balanced in length. Currently, too much of the abstract is devoted to presenting results. Additionally, the use of terms like ‘’remarkable’’ to describe the accuracy of outcomes should be avoided.

 

3) Keywords are missing

4) The language throughout the paper requires revision to improve readability and rectify syntactical and grammatical errors (e.g., ‘’were’’ in line 33). Furthermore, the titles of the figures must be revised to be more descriptive and standalone. The authors must ensure that figures can be understood independently of the text.

 

5) The introduction must be revised, potentially separating the literature review into its own section. Critically, the introduction must outline the contributions of the paper to the  existing body of literature, as well as the rationale behind the chosen methodological setting. For example, why does the study focus on Marocco, and what is the value of this region? Similarly, why do the authors use these specific forecasting methods over others? This should be done accordingly for every other case that pertains to this comment (e.g., choice of error metrics). Finally, the authors must use more comprehensive paragraphs, avoiding the use of very short paragraphs.

6) Why don’t the authors use a benchmark forecasting method for diagnostic purposes? Usually, in similar studies, the naïve method is used in this regard to compare and assess the relative performance of the methods employed.

7) In the discussion section, the experimental results must be compared with relevant studies in the existing body of literature.

8) The paper’s limitations and suggestions for future research should be clearly stated in the final paragraph.

 

 

Comments on the Quality of English Language

The language of the paper needs improvement to enhance readability and rectify syntactical and grammatical errors.

Author Response

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Author Response File: Author Response.docx

Reviewer 2 Report

Comments and Suggestions for Authors

1.      Abstract: please merge the last two paragraphs: they are repetitive.

2.      Introduction: discuss literature on forecast evaluation experiments that look at various forecast (investment) horizons, e.g., 1-day ahead, 2-days ahead, etc.

3.      Line 37-38: what do you mean by …..standard markets? Do you mean to say cash markets? Note that there are futures markets for commodities (see lines 44-45).

4.      Many acronyms used in the introduction are undefined (but some are defined later in the paper). Please describe all of them where they are first cited.

 

5.      Are the correlations shown on page 6 significant? (Provide p-values).

6.      Equation (1) on line 267 is correct for Yt stationary. If Yt has a unit-root then, the model changes. Did you test for unit-roots (to determine “d” on page 386)?

7.      The nominal measures of forecasting performance are very small. Did you test, for example, differences in MSEs? See Diebold and Mariano (1995) “Comparing Predictive Accuracy” JBES, 13, 253-263 and subsequent literature.

8.      Did you simulate what happens at alternative investment horizons (say one-step ahead? 2-SA, 3-SA, etc.?

9.      Would a portfolio manager make money using forecasts from the best forecasting model? If yes, what does this mean for the efficiency of the Moroccan Stock Exchange?

Comments on the Quality of English Language

See comments.

Author Response

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Author Response File: Author Response.docx

Reviewer 3 Report

Comments and Suggestions for Authors

The study highlights the importance of accurate stock price forecasting for market participants and emphasizes how its predictive models can help optimize investment decisions. It contributes an application of machine learning techniques to analyze credit company performance on the Casablanca exchange. By showcasing the LSTM model's forecasting ability, the research provides useful insights for traders and investors in Morocco. Additionally, it aims to advance stock prediction in the country while serving as a resource for navigating complexities of the exchange.

However, the paper could be strengthened by discussing limitations of its approach and potential biases. Findings should also be evaluated in the context of prior work to validate their significance. Locating results within the broader domain would contextualize contributions and implications. Addressing these aspects would offer a more rigorous analysis and help establish the robustness and impact of the predictive models explored.

Comments on the Quality of English Language

The authors use appropriate academic language and terminology throughout the paper, demonstrating a good command of the subject matter. The sentences are generally well-formed, and the ideas are expressed clearly. While the overall language quality is good, a moderate English editing could help enhance clarity and readability of this paper.

Author Response

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Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

Comments and Suggestions for Authors

The authors have incorporated my comments into the paper or provided rebuttals where necessary. Therefore, I propose the acceptance of the paper. 

Author Response

Dear Reviewer,

We sincerely appreciate your valuable help in improving our paper. Thank you for your thoughtful feedback and support.

Best regards,

Reviewer 2 Report

Comments and Suggestions for Authors

Please see attachment.

Comments for author File: Comments.pdf

Comments on the Quality of English Language

Author Response

Dear Reviewer,

Thank you for your insightful comments and recommendations. We have thoroughly reviewed your feedback and have made the necessary revisions to enhance the quality of our paper.

Addressing Forecasting Performance Measures: We acknowledged the limitation of not testing nominal measures of forecasting performance, particularly the differences in MSEs. This has now been explicitly mentioned as a limitation in the conclusion section.

Considering Alternative Investment Horizons: We incorporated the limitation regarding our focus on one-step-ahead predictions. While our study primarily focused on short-term investment decision-making, we now discuss the need for future research to explore longer investment horizons to provide a more comprehensive analysis of model performance over different time spans.

Clarifying the Predictability of Stock Prices: We addressed the predictability of stock prices using daily data, discussing rational factors such as the structure and trading restrictions of the Moroccan CSE and the possibility that investors are being rewarded for taking risks. This has been integrated into the conclusion to provide deeper insights into the underlying mechanisms of stock price movements.

Emphasizing Forecasting as a Core Focus: We have revised the conclusion to maintain the focus on the forecasting exercise, aligning with your recommendation. The conclusion now emphasizes the significance of advanced forecasting techniques in the Moroccan stock market while acknowledging the broader implications of our findings.

We hope that the revisions meet your expectations and enhance the overall quality of the paper. We look forward to your acceptance of our revised manuscript.

Best regards,

Round 3

Reviewer 2 Report

Comments and Suggestions for Authors

Thank you for your revisions. A discussion of efficiency deserves closer examination.

Comments on the Quality of English Language

No comments