Can technical analysis using computer vision generate alpha in the stock market?
2024 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE credits
Student thesis
Abstract [en]
We investigate the novel idea of using computer vision to predict future stock price movement, which is performed by training a convolutional neural network (CNN) to detect patterns in images of stock graphs. Subsequently, we create a portfolio strategy based on the CNN stock price predictions to see if these predictions can generate alpha for investors. We apply this method in the Swedish stock market and evaluate the performance of CNN portfolios across two different exchanges and various stock indices segmented by market capitalisation. Our findings show that trading based on CNN predictions can outperform our benchmarks and generate positive alpha. Most of our portfolios generate positive alpha before transaction costs, while one also generates positive alpha after deducting transaction costs. Further, our results demonstrate that CNN models are capable of successfully generalising their trained knowledge, being able to detect information in stock graphs it has never seen before. This suggests that CNN models are not limited to the characteristics present in their training data, indicating that models trained under one set of market conditions can also be effective in a different market scenario. Our resultsfurther strengthen the overall findings of other researchers utilising similar methods as ours.
Place, publisher, year, edition, pages
2024. , p. 41
Keywords [en]
Convolutional neural network (CNN), Computer vision, Machine learning, Technical analysis, Stock prediction, Equity anomalies
National Category
Business Administration Computer graphics and computer vision
Identifiers
URN: urn:nbn:se:uu:diva-533055OAI: oai:DiVA.org:uu-533055DiVA, id: diva2:1876144
Subject / course
Business Studies
Educational program
Master's Programme in Accounting and Financial Management
Supervisors
Examiners
2024-06-242024-06-242025-02-01Bibliographically approved