An Attention-Based Autoencoder Model with Gated Recurrent Unit for Stock Price Movement Prediction

Abstract

Predicting stock movements is crucial for investors looking to maximize their profits in rapidly changing financial markets. However, noise in stock price data makes it harder to detect the trends and ultimately decreases the performance of predictive models. To address these challenges that are caused by noise, this study proposes two novel models, i.e., an Attention-based Autoencoder (ABA) and an Attention-based Variational Autoencoder with Gated Recurrent Units (AGRUA), which uniquely integrate denoising, attention, and GRU layers. Firstly, a data set is created by adding 9 different technical indicators to the historical data of Borsa Istanbul (BIST 30) stocks. Secondly, proposed methods and other well-known deep learning models were used to remove noise from the data sets. Finally, each denoised dataset was fed separately to the Extreme Gradient Boosting model and subjected to a buy-sell process. The results were measured using trading indicators such as amount of the profits and Sharpe Ratio, Sortino Ratio and Maximum Drawdown. The proposed models produced substantial financial gains, with AGRUA achieving the highest total profit and ABA achieving the lowest average Maximum Drawdown, thereby demonstrating superior risk-adjusted performance. Lastly, Friedman and Nemenyi tests confirmed that AGRUA and ABA surpass most of the benchmarks in profit and risk-adjusted returns. The performance of the proposed method demonstrates its value in capturing nonlinear market patterns and improving decision accuracy, emphasizing the need for noise reduction before forecasting.