Bull and bear A System for Comparative Analysis of Different Stock Prediction Methodologies for Beginner Investors team: ishan jain, Tanmay goel, Mohibul Hassan, Nimisha Goyal Advised by Prof. David rossiter Introduction Investing in stocks, if done correctly, is a very effective way to earn passive income. However, for an average individual from a non- finance background, it can be confusing, overwhelming and even dangerous if given the wrong advice. No current system exists that compares and analyses the current methods for effectiveness and educates beginner and interested investors about investing. Bull and Bear aims to 1. Provide predictions made by different indicators within Technical Analysis 2. Perform Sentiment Analysis on financial news and tweets related to the stocks 3. Compare these techniques with each other and inform the user about the effectiveness of each prediction technique over a period of time 4. Encompass all the above features in an aesthetically pleasing and intuitive user interface BB Indicators methodology conclusion We selected the following four technical indicators based on their effectiveness, popularity and simplicity in terms of understanding, coding and implementation. We ensured that these indicators encompass all the broader types of technical analyses including volatility, trend and momentum indicators as well as leading and lagging indicators. We backtested different parameters for 13 years of past to find the optimal ones for Dow Jones stock. Our system provides users with 1. The recommendation - (BUY/HOLD/SELL) for each indicator 2. How effective the indicator has been for the specific stock Sentiment Our experiments in this aspect have indicated that generally used indicators with the standard parameters are not the optimal ways to predict stock price movement and trade. Parameters for each indicator can be customized for each stock to get the best returns. Additionally, even the relative effectiveness of different indicators will change depending on the particular stock. This leaves room for further customization of technical analysis for each stock or index to ensure the gains are maximized. Indicator Finalized Parameters Yearly return (for the past 13 years) EMA Period - 128 days 10.48% MACD 1st period – 18 days 2nd period – 4 days 7.95% RSI Period – 15 days Upper Band – 78 Lower Band – 37 9.69% Bollinger Bands Period – 14 days Standard deviation – 1.7 8.39% Although our system currently does an analysis on current news articles, Bull & Bear only provides suggestions based on the Twitter Analysis because of sparsity of Stock Specific News. For Twitter, we chose the most reliable stocks based on some criteria, and backtested based on data available since 2015. We realised that Twitter sometimes has better results than Technical Analysis. However, on average, technical analysis does perform better.

Bulland bear - HKUSTrossiter/fyp/90_RO3_Poster_201819.pdf · Indicator Finalized Parameters Yearly return (for the past 13 years) EMA Period -128 days 10.48% MACD 1st period –18

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Bull and bearA System for Comparative Analysis of Different Stock Prediction

Methodologies for Beginner Investors

team: ishan jain, Tanmay goel, Mohibul Hassan, Nimisha GoyalAdvised by Prof. David rossiter

IntroductionInvesting in stocks, if done correctly, is a veryeffective way to earn passive income.However, for an average individual from a non-finance background, it can be confusing,overwhelming and even dangerous if given thewrong advice. No current system exists thatcompares and analyses the current methods foreffectiveness and educates beginner and interestedinvestors about investing.

Bull and Bear aims to1. Provide predictions made by different indicators within Technical Analysis2. Perform Sentiment Analysis on financial news and tweets related to the stocks3. Compare these techniques with each other and inform the user about the effectiveness of each prediction technique over a period of time4. Encompass all the above features in an aesthetically pleasing and intuitive user interface

Indicators methodology

conclusion

We selected the following four technical indicators based on theireffectiveness, popularity and simplicity in terms of understanding,coding and implementation. We ensured that these indicatorsencompass all the broader types of technical analyses includingvolatility, trend and momentum indicators as well as leading andlagging indicators. We backtested different parameters for 13years of past to find the optimal ones for Dow Jones stock.Our system provides users with1. The recommendation - (BUY/HOLD/SELL) for each indicator 2. How effective the indicator has been for the specific stock

Sentiment

Our experiments in this aspect have indicated thatgenerally used indicators with the standardparameters are not the optimal ways to predict stockprice movement and trade. Parameters for eachindicator can be customized for each stock to get thebest returns. Additionally, even the relativeeffectiveness of different indicators will changedepending on the particular stock. This leaves roomfor further customization of technical analysis for eachstock or index to ensure the gains are maximized.

Indicator Finalized Parameters Yearly return (for the past 13 years)EMA Period - 128 days 10.48%

MACD 1st period – 18 days2nd period – 4 days

7.95%

RSI Period – 15 daysUpper Band – 78Lower Band – 37

9.69%

Bollinger Bands Period – 14 daysStandard deviation – 1.7

8.39%

Although our system currently does ananalysis on current news articles, Bull & Bearonly provides suggestions based on theTwitter Analysis because of sparsity of StockSpecific News. For Twitter, we chose themost reliable stocks based on some criteria,and backtested based on data available since2015. We realised that Twitter sometimes hasbetter results than Technical Analysis.However, on average, technical analysis doesperform better.