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Research on Quantitative Investment Strategies Based on Deep Learning

by 1,2, 1,3,* and 1
1
SHU-UTS SILC Business School, Shanghai University, Shanghai 201899, China
2
Carey Business School, The Johns Hopkins University, Baltimore, MD 20036, USA
3
Smart City Research Institute, Shanghai University, Shanghai 201899, China
*
Author to whom correspondence should be addressed.
Algorithms 2019, 12(2), 35; https://doi.org/10.3390/a12020035
Received: 5 January 2019 / Revised: 2 February 2019 / Accepted: 9 February 2019 / Published: 12 February 2019
This paper takes 50 ETF options in the options market with high transaction complexity as the research goal. The Random Forest (RF) model, the Long Short-Term Memory network (LSTM) model, and the Support Vector Regression (SVR) model are used to predict 50 ETF price. Firstly, the original quantitative investment strategy is taken as the research object, and the 15 min trading frequency, which is more in line with the actual trading situation, is used, and then the Delta hedging concept of the options is introduced to control the risk of the quantitative investment strategy, to achieve the 15 min hedging strategy. Secondly, the final transaction price, buy price, highest price, lowest price, volume, historical volatility, and the implied volatility of the time segment marked with 50 ETF are the seven key factors affecting the price of 50 ETF. Then, two different types of LSTM-SVR models, LSTM-SVR I and LSTM-SVR II, are used to predict the final transaction price of the 50 ETF in the next time segment. In LSTM-SVR I model, the output of LSTM and seven key factors are combined as the input of SVR model. In LSTM-SVR II model, the hidden state vectors of LSTM and seven key factors are combined as the inputs of the SVR model. The results of the two LSTM-SVR models are compared with each other, and the better one is applied to the trading strategy. Finally, the benefit of the deep learning-based quantitative investment strategy, the resilience, and the maximum drawdown are used as indicators to judge the pros and cons of the research results. The accuracy and deviations of the LSTM-SVR prediction models are compared with those of the LSTM model and those of the RF model. The experimental results show that the quantitative investment strategy based on deep learning has higher returns than the traditional quantitative investment strategy, the yield curve is more stable, and the anti-fall performance is better. View Full-Text
Keywords: deep learning; quantitative investment strategy; options prediction; long short-term memory network; support vector regression; random forest deep learning; quantitative investment strategy; options prediction; long short-term memory network; support vector regression; random forest
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MDPI and ACS Style

Fang, Y.; Chen, J.; Xue, Z. Research on Quantitative Investment Strategies Based on Deep Learning. Algorithms 2019, 12, 35. https://doi.org/10.3390/a12020035

AMA Style

Fang Y, Chen J, Xue Z. Research on Quantitative Investment Strategies Based on Deep Learning. Algorithms. 2019; 12(2):35. https://doi.org/10.3390/a12020035

Chicago/Turabian Style

Fang, Yujie; Chen, Juan; Xue, Zhengxuan. 2019. "Research on Quantitative Investment Strategies Based on Deep Learning" Algorithms 12, no. 2: 35. https://doi.org/10.3390/a12020035

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