Novel grey wolf optimizer based parameters selection for GARCH and ARIMA models for stock price prediction

Document Type

Article

Publication Title

PeerJ Computer Science

Abstract

Stock price data often exhibit nonlinear patterns and dynamics in nature. The parameter selection in generalized autoregressive conditional heteroskedasticity (GARCH) and autoregressive integrated moving average (ARIMA) models is challenging due to stock price volatility. Most studies examined the manual method for parameter selection in GARCH and ARIMA models. These procedures are time-consuming and based on trial and error. To overcome this, we considered a GWO method for finding the optimal parameters in GARCH and ARIMA models. The motivation behind considering the grey wolf optimizer (GWO) is one of the popular methods for parameter optimization. The novel GWO-based parameters selection approach for GARCH and ARIMA models aims to improve stock price prediction accuracy by optimizing the parameters of ARIMA and GARCH models. The hierarchical structure of GWO comprises four distinct categories: alpha (α), beta (β), delta (δ) and omega (ω). The predatory conduct of wolves primarily encompasses the act of pursuing and closing in on the prey, tracing the movements of the prey, and ultimately launching an attack on the prey. In the proposed context, attacking prey is a selection of the best parameters for GARCH and ARIMA models. The GWO algorithm iteratively updates the positions of wolves to provide potential solutions in the search space in GARCH and ARIMA models. The proposed model is evaluated using root mean squared error (RMSE), mean squared error (MSE), and mean absolute error (MAE). The GWO-based parameter selection for GARCH and ARIMA improves the performance of the model by 5% to 8% compared to existing traditional GARCH and ARIMA models.

DOI

10.7717/peerj-cs.1735

Publication Date

1-1-2024

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