A Gaussian Process Regression Model for Forecasting Stock Exchange of Thailand

Abstract

A stock price index measures the change in several share prices, which can describe the market and assist investors in deciding on a specific investment. Thus, foreseeing the stock price index benefits investors in creating a better investment strategy. However, forecasting the stock price index can be challenging due to its non-linearity, non-stationary and high uncertainty. Gaussian process regression (GPR) is an attractive and powerful approach for prediction, especially when the data fluctuates over time with fewer restrictions. Besides, the GPR gains advantages over other forecasting techniques as it can offer predictions with uncertainty to provide margin errors. In this study, we evaluate the use of GPR to predict the stock price of Thailand (SET). The SET data are divided into 2 datasets; the data in the year 2015-2020 and the data in the year 2020 due to the massive change during the COVID-19 pandemic. The prediction results from the GPR are then compared to the machine learning approaches, artificial neural network (ANN) and recurrent neural network (RNN) using evaluation scores; the root mean square error (RMSE), the mean absolute error (MAE), the mean absolute percentage error (MAPE) and the Nash-Sutcliffe efficiency (NSE). The results indicate that the GPR is superior to the ANN and RNN for both datasets as it provides a high prediction accuracy. Moreover, the results suggest that the GPR is less sensitive to the number of input lags in the model. Therefore, the GPR is more favorable for the prediction of SET than the ANN and RNN.