Implementing NLP techniques and data for Europe financial market forecasting

Research Article
Open access

Implementing NLP techniques and data for Europe financial market forecasting

Yihong Su 1* , Yuanhong Xiang 2 , Yiming Lai 3 , Rui Liu 4
  • 1 Ocean University of China (Laoshan Campus)    
  • 2 University of New South Wales    
  • 3 Chongqing No.1 Middle School    
  • 4 University of Washington    
  • *corresponding author syh1119@stu.ouc.edu.cn
Published on 23 October 2023 | https://doi.org/10.54254/2755-2721/18/20230991
ACE Vol.18
ISSN (Print): 2755-273X
ISSN (Online): 2755-2721
ISBN (Print): 978-1-83558-027-1
ISBN (Online): 978-1-83558-028-8

Abstract

The large military conflict between Russia and Ukraine has consequences for the global financial market. The European region is one of the hardest hits, which experienced a high energy cost and devaluation of the currency. This paper investigates the Employment Expectations Indicator (EEI) and Economic Sentiment Indicator (ESI) from the business consumer survey index to reflect the reaction of the consumers of the European market by implementing Natural Language Processing (NLP) techniques and machine learning. In the object, the monetary policy decisions from European Central Bank are considered the data set for forecasting the Index. In the result, all nine models from ‘scikit-learn’ contributed a great job in both categories of Accuracy, Precision, and F-score and Recall with a level of 90% as average. It represents that the NLP techniques effectively forecast the future value of two European business and consumer indexes. However, the limit of the dataset and model mostly related to the performance of NLP techniques is working for forecasting but less related to the expected values of the EEI and ESI indices. Future research would focus more on forecasting the expected value of the two indexes and reflect the consumers' reactions in the markets.

Keywords:

NLP techniques, machine learning, deep learning, financial market prediction

Su,Y.;Xiang,Y.;Lai,Y.;Liu,R. (2023). Implementing NLP techniques and data for Europe financial market forecasting. Applied and Computational Engineering,18,194-207.
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References

[1]. Susan V. Scott & Markos Zachariadis (2012) Origins and development of SWIFT, 1973–2009, Business History, 54:3, 462-482, DOI: 10.1080/00076791.2011.638502

[2]. Lo, Gaye-Del & Marcelin, Isaac & Bassène, Théophile & Sène, Babacar (2022) "The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities," Finance Research Letters, Elsevier, vol. 50(C).

[3]. Frederic S. Mishkin (2016) The Economics of Money, Banking, and Financial Markets (Eleventh Edition), Pearson.

[4]. Lo, G. D., Marcelin, I., Bassène, T., & Sène, B. (2022, December). The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities. Finance Research Letters, 50, 103194. https://doi.org/10.1016/j.frl.2022.103194

[5]. The Fed. (2022, June 21). The Fed - Monetary Policy: Monetary Policy Report. The Fed - Monetary Policy: Monetary Policy Report. Retrieved November 15, 2022, from https://www.federalreserve.gov/monetarypolicy/2022-06-mpr-summary.htm

[6]. deLisle, J. (2022). Deterrence Dilemmas and Alliance Dynamics: United States Policy on Cross-Strait Issues and the Implications of the War in Ukraine. American Journal of Chinese Studies, 29(2).

[7]. Lehmann, R. The Forecasting Power of the ifo Business Survey. J Bus Cycle Res (2022). https://doi.org/10.1007/s41549-022-00079-5

[8]. Hoekstra, Janny C., and Peter SH Leeflang. "Thriving through turbulence: Lessons from marketing academia and marketing practice." European Management Journal (2022).

[9]. Lo, G. D., Marcelin, I., Bassène, T., & Sène, B. (2022, December). The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities. Finance Research Letters, 50, 103194. https://doi.org/10.1016/j.frl.2022.103194

[10]. Zhang, T., Yang, K., Ji, S., & Ananiadou, S. (2023). Emotion fusion for mental illness detection from social media: A survey. Information Fusion, 92, 231-246.

[11]. Cui, Y., Jiang, Y., & Gu, H. (2023, January). Novel Sentiment Analysis from Twitter for Stock Change Prediction. In Data Mining and Big Data: 7th International Conference, DMBD 2022, Beijing, China, November 21–24, 2022, Proceedings, Part II (pp. 160-172). Singapore: Springer Nature Singapore.

[12]. Alslaity, A., & Orji, R. (2022). Machine learning techniques for emotion detection and sentiment analysis: current state, challenges, and future directions. Behaviour & Information Technology, 1-26.

[13]. Ruby, D., & About The Author Daniel Ruby Content writer with 10+ years of experience. I write across a range of subjects. (2023, March 1). 58+ twitter statistics for marketers in 2023 (Users & Trends). Demand Sage. Retrieved March 18, 2023, from https://www.demandsage.com/twitter-statistics/#:~:text=Twitter%20has%20around%20450%20million%20monthly%20active%20users%20as%20of%202023

[14]. Tiwari, A. K., Abakah, E. J. A., Bonsu, C. O., Karikari, N. K., & Hammoudeh, S. (2022). The effects of public sentiments and feelings on stock market behavior: Evidence from Australia. Journal of Economic Behavior & Organization, 193, 443-472.

[15]. Sawicki, G. S., Chilvers, M., McNamara, J., Naehrlich, L., Saunders, C., Sermet-Gaudelus, I., ... & Davies, J. C. (2022). A Phase 3, open-label, 96-week trial to study the safety, tolerability, and efficacy of tezacaftor/ivacaftor in children≥ 6 years of age homozygous for F508del or heterozygous for F508del and a residual function CFTR variant. Journal of Cystic Fibrosis, 21(4), 675-683.

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[17]. Fan, J., Campbell, M., & Kingsbury, B. (2011). Artificial intelligence research at IBM. IBM Journal of Research and Development, 55(5), 16-1.

[18]. Torfi, A., Shirvani, R. A., Keneshloo, Y., Tavaf, N., & Fox, E. A. (2020). Natural language processing advancements by deep learning: A survey. arXiv preprint arXiv:2003.01200.

[19]. Chen, S., Wang, C., Chen, Z., Wu, Y., Liu, S., Chen, Z., ... & Wei, F. (2022). Wavlm: Large-scale self-supervised pre-training for full stack speech processing. IEEE Journal of Selected Topics in Signal Processing, 16(6), 1505-1518.

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[21]. Jolicoeur, P., & Jolicoeur, P. (1999). Fisher’s linear discriminant function. Introduction to biometry, 303-308.

[22]. Naïve Bayes Classifiers Revisited, Domingos, P., 1997.

[23]. A Few Useful Things to Know About Machine Learning, Pedro Domingos, 2012.

[24]. Gradient-based learning applied to document recognition, LeCun, Y. et al., 1998.

[25]. Long Short-Term Memory, Hochreiter, S. & Schmidhuber, J., 1997.

[26]. Random Forests, Breiman, L., 2001.

[27]. A Logical Calculus of the Ideas Immanent in Nervous Activity, McCulloch, W. S. & Pitts, W., 1943.

[28]. The perceptron: a probabilistic model for information storage and organization in the brain, Rosenblatt, F., 1958.

[29]. Some studies in machine learning using the game of checkers, Samuel, A. L., 1962.

[30]. Beyond Regression: New Tools for Prediction and Analysis in the Behavioral Sciences, Werbos, P. J., 1975.

[31]. Learning internal representations by error propagation, Rumelhart, D. E., Hinton, G. E. & Williams, R. J., 1986.

[32]. A Tutorial on Support Vector Machines for Pattern Recognition, Burges, C. J. C., 1998.

[33]. European Central Bank. (2020, January 8). ECB Monetary policy decisions. European Central Bank. Retrieved March 18, 2023, from https://www.ecb.europa.eu/press/govcdec/mopo/html/index.en.html

[34]. European Central Bank. (n.d.). ECB Latest Business and Consumer Surveys. Economy and Finance. Retrieved March 18, 2023, from https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/business-and-consumer-surveys/latest-business-and-consumer-surveys_en

[35]. Salton, G., & Buckley, C. (1988). Term-weighting approaches in automatic text retrieval. Information Processing & Management, 24(5), 513-523.

[36]. A method of comparing two groups of learning, Cover, T. & Hart, P., 1967

[37]. Pu, Y., Apel, D. B., & Xu, H. (2019). Rockburst prediction in kimberlite with unsupervised learning method and support vector classifier. Tunnelling and Underground Space Technology, 90, 12-18.

[38]. Gibbs, M. N., & MacKay, D. J. (2000). Variational Gaussian process classifiers. IEEE Transactions on Neural Networks, 11(6), 1458-1464.

[39]. Du, W., & Zhan, Z. (2002). Building decision tree classifier on private data.

[40]. Rish, I. (2001, August). An empirical study of the naive Bayes classifier. In IJCAI 2001 workshop on empirical methods in artificial intelligence (Vol. 3, No. 22, pp. 41-46).

[41]. Ghojogh, B., & Crowley, M. (2019). Linear and quadratic discriminant analysis: Tutorial. arXiv preprint arXiv:1906.02590.

[42]. Rojas, R. (2009). AdaBoost and the super bowl of classifiers a tutorial introduction to adaptive boosting. Freie University, Berlin, Tech. Rep.

[43]. Hampshire II, J. B., & Pearlmutter, B. (1991). Equivalence proofs for multi-layer perceptron classifiers and the Bayesian discriminant function. In Connectionist Models (pp. 159-172). Morgan Kaufmann.

[44]. Kulkarni, V. Y., & Sinha, P. K. (2012, July). Pruning of random forest classifiers: A survey and future directions. In 2012 International Conference on Data Science & Engineering (ICDSE) (pp. 64-68). IEEE.


Cite this article

Su,Y.;Xiang,Y.;Lai,Y.;Liu,R. (2023). Implementing NLP techniques and data for Europe financial market forecasting. Applied and Computational Engineering,18,194-207.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 5th International Conference on Computing and Data Science

ISBN:978-1-83558-027-1(Print) / 978-1-83558-028-8(Online)
Editor:Marwan Omar, Roman Bauer, Alan Wang
Conference website: https://2023.confcds.org/
Conference date: 14 July 2023
Series: Applied and Computational Engineering
Volume number: Vol.18
ISSN:2755-2721(Print) / 2755-273X(Online)

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References

[1]. Susan V. Scott & Markos Zachariadis (2012) Origins and development of SWIFT, 1973–2009, Business History, 54:3, 462-482, DOI: 10.1080/00076791.2011.638502

[2]. Lo, Gaye-Del & Marcelin, Isaac & Bassène, Théophile & Sène, Babacar (2022) "The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities," Finance Research Letters, Elsevier, vol. 50(C).

[3]. Frederic S. Mishkin (2016) The Economics of Money, Banking, and Financial Markets (Eleventh Edition), Pearson.

[4]. Lo, G. D., Marcelin, I., Bassène, T., & Sène, B. (2022, December). The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities. Finance Research Letters, 50, 103194. https://doi.org/10.1016/j.frl.2022.103194

[5]. The Fed. (2022, June 21). The Fed - Monetary Policy: Monetary Policy Report. The Fed - Monetary Policy: Monetary Policy Report. Retrieved November 15, 2022, from https://www.federalreserve.gov/monetarypolicy/2022-06-mpr-summary.htm

[6]. deLisle, J. (2022). Deterrence Dilemmas and Alliance Dynamics: United States Policy on Cross-Strait Issues and the Implications of the War in Ukraine. American Journal of Chinese Studies, 29(2).

[7]. Lehmann, R. The Forecasting Power of the ifo Business Survey. J Bus Cycle Res (2022). https://doi.org/10.1007/s41549-022-00079-5

[8]. Hoekstra, Janny C., and Peter SH Leeflang. "Thriving through turbulence: Lessons from marketing academia and marketing practice." European Management Journal (2022).

[9]. Lo, G. D., Marcelin, I., Bassène, T., & Sène, B. (2022, December). The Russo-Ukrainian war and financial markets: the role of dependence on Russian commodities. Finance Research Letters, 50, 103194. https://doi.org/10.1016/j.frl.2022.103194

[10]. Zhang, T., Yang, K., Ji, S., & Ananiadou, S. (2023). Emotion fusion for mental illness detection from social media: A survey. Information Fusion, 92, 231-246.

[11]. Cui, Y., Jiang, Y., & Gu, H. (2023, January). Novel Sentiment Analysis from Twitter for Stock Change Prediction. In Data Mining and Big Data: 7th International Conference, DMBD 2022, Beijing, China, November 21–24, 2022, Proceedings, Part II (pp. 160-172). Singapore: Springer Nature Singapore.

[12]. Alslaity, A., & Orji, R. (2022). Machine learning techniques for emotion detection and sentiment analysis: current state, challenges, and future directions. Behaviour & Information Technology, 1-26.

[13]. Ruby, D., & About The Author Daniel Ruby Content writer with 10+ years of experience. I write across a range of subjects. (2023, March 1). 58+ twitter statistics for marketers in 2023 (Users & Trends). Demand Sage. Retrieved March 18, 2023, from https://www.demandsage.com/twitter-statistics/#:~:text=Twitter%20has%20around%20450%20million%20monthly%20active%20users%20as%20of%202023

[14]. Tiwari, A. K., Abakah, E. J. A., Bonsu, C. O., Karikari, N. K., & Hammoudeh, S. (2022). The effects of public sentiments and feelings on stock market behavior: Evidence from Australia. Journal of Economic Behavior & Organization, 193, 443-472.

[15]. Sawicki, G. S., Chilvers, M., McNamara, J., Naehrlich, L., Saunders, C., Sermet-Gaudelus, I., ... & Davies, J. C. (2022). A Phase 3, open-label, 96-week trial to study the safety, tolerability, and efficacy of tezacaftor/ivacaftor in children≥ 6 years of age homozygous for F508del or heterozygous for F508del and a residual function CFTR variant. Journal of Cystic Fibrosis, 21(4), 675-683.

[16]. Guzmán, R., & Morales, G. Discursive Strategies and Assessment in Turing test: A developmental analysis of L2 acquisition.

[17]. Fan, J., Campbell, M., & Kingsbury, B. (2011). Artificial intelligence research at IBM. IBM Journal of Research and Development, 55(5), 16-1.

[18]. Torfi, A., Shirvani, R. A., Keneshloo, Y., Tavaf, N., & Fox, E. A. (2020). Natural language processing advancements by deep learning: A survey. arXiv preprint arXiv:2003.01200.

[19]. Chen, S., Wang, C., Chen, Z., Wu, Y., Liu, S., Chen, Z., ... & Wei, F. (2022). Wavlm: Large-scale self-supervised pre-training for full stack speech processing. IEEE Journal of Selected Topics in Signal Processing, 16(6), 1505-1518.

[20]. Friederich, S. (2017). Fine-tuning.

[21]. Jolicoeur, P., & Jolicoeur, P. (1999). Fisher’s linear discriminant function. Introduction to biometry, 303-308.

[22]. Naïve Bayes Classifiers Revisited, Domingos, P., 1997.

[23]. A Few Useful Things to Know About Machine Learning, Pedro Domingos, 2012.

[24]. Gradient-based learning applied to document recognition, LeCun, Y. et al., 1998.

[25]. Long Short-Term Memory, Hochreiter, S. & Schmidhuber, J., 1997.

[26]. Random Forests, Breiman, L., 2001.

[27]. A Logical Calculus of the Ideas Immanent in Nervous Activity, McCulloch, W. S. & Pitts, W., 1943.

[28]. The perceptron: a probabilistic model for information storage and organization in the brain, Rosenblatt, F., 1958.

[29]. Some studies in machine learning using the game of checkers, Samuel, A. L., 1962.

[30]. Beyond Regression: New Tools for Prediction and Analysis in the Behavioral Sciences, Werbos, P. J., 1975.

[31]. Learning internal representations by error propagation, Rumelhart, D. E., Hinton, G. E. & Williams, R. J., 1986.

[32]. A Tutorial on Support Vector Machines for Pattern Recognition, Burges, C. J. C., 1998.

[33]. European Central Bank. (2020, January 8). ECB Monetary policy decisions. European Central Bank. Retrieved March 18, 2023, from https://www.ecb.europa.eu/press/govcdec/mopo/html/index.en.html

[34]. European Central Bank. (n.d.). ECB Latest Business and Consumer Surveys. Economy and Finance. Retrieved March 18, 2023, from https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/business-and-consumer-surveys/latest-business-and-consumer-surveys_en

[35]. Salton, G., & Buckley, C. (1988). Term-weighting approaches in automatic text retrieval. Information Processing & Management, 24(5), 513-523.

[36]. A method of comparing two groups of learning, Cover, T. & Hart, P., 1967

[37]. Pu, Y., Apel, D. B., & Xu, H. (2019). Rockburst prediction in kimberlite with unsupervised learning method and support vector classifier. Tunnelling and Underground Space Technology, 90, 12-18.

[38]. Gibbs, M. N., & MacKay, D. J. (2000). Variational Gaussian process classifiers. IEEE Transactions on Neural Networks, 11(6), 1458-1464.

[39]. Du, W., & Zhan, Z. (2002). Building decision tree classifier on private data.

[40]. Rish, I. (2001, August). An empirical study of the naive Bayes classifier. In IJCAI 2001 workshop on empirical methods in artificial intelligence (Vol. 3, No. 22, pp. 41-46).

[41]. Ghojogh, B., & Crowley, M. (2019). Linear and quadratic discriminant analysis: Tutorial. arXiv preprint arXiv:1906.02590.

[42]. Rojas, R. (2009). AdaBoost and the super bowl of classifiers a tutorial introduction to adaptive boosting. Freie University, Berlin, Tech. Rep.

[43]. Hampshire II, J. B., & Pearlmutter, B. (1991). Equivalence proofs for multi-layer perceptron classifiers and the Bayesian discriminant function. In Connectionist Models (pp. 159-172). Morgan Kaufmann.

[44]. Kulkarni, V. Y., & Sinha, P. K. (2012, July). Pruning of random forest classifiers: A survey and future directions. In 2012 International Conference on Data Science & Engineering (ICDSE) (pp. 64-68). IEEE.