Precise Stock Price Prediction for Optimized Portfolio Design Using an LSTM Model
This addresses portfolio design for investors in the Indian stock market, but it is incremental as it applies an existing LSTM method to new sector-specific data.
The paper tackled stock price prediction and portfolio optimization for Indian sectors using an LSTM model, achieving very high accuracy in predicting returns and risks compared to actual data from June 2021.
Accurate prediction of future prices of stocks is a difficult task to perform. Even more challenging is to design an optimized portfolio of stocks with the identification of proper weights of allocation to achieve the optimized values of return and risk. We present optimized portfolios based on the seven sectors of the Indian economy. The past prices of the stocks are extracted from the web from January 1, 2016, to December 31, 2020. Optimum portfolios are designed on the selected seven sectors. An LSTM regression model is also designed for predicting future stock prices. Five months after the construction of the portfolios, i.e., on June 1, 2021, the actual and predicted returns and risks of each portfolio are computed. The predicted and the actual returns indicate the very high accuracy of the LSTM model.