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.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:uu-533055 |
| Date | January 2024 |
| Creators | Lian, Rasmus, Clarin, Oscar |
| Publisher | Uppsala universitet, Företagsekonomiska institutionen |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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