The Potential of Quantum Techniques for Stock Price Prediction

TL;DR

This paper investigates the use of quantum algorithms like Quantum Annealing and QSVM for stock price prediction, comparing their performance with classical models through experimental simulations on real stock data.

Contribution

It introduces a novel quantum-based approach to stock prediction, integrating feature selection, dimensionality reduction, and classification with quantum algorithms.

Findings

Quantum models achieved comparable accuracy to classical models.

Quantum techniques showed potential advantages in feature selection and classification.

Limitations of quantum algorithms in prediction accuracy were identified.

Abstract

We explored the potential applications of various Quantum Algorithms for stock price prediction by conducting a series of experimental simulations using both Classical as well as Quantum Hardware. Firstly, we extracted various stock price indicators, such as Moving Averages (MA), Average True Range (ATR), and Aroon, to gain insights into market trends and stock price movements. Next, we employed Quantum Annealing (QA) for feature selection and Principal Component Analysis (PCA) for dimensionality reduction. Further, we transformed the stock price prediction task essentially into a classification problem. We trained the Quantum Support Vector Machine (QSVM) to predict price movements (whether up or down) contrasted their performance with classical models and analyzed their accuracy on a dataset formulated using Quantum Annealing and PCA individually. We focused on the stock price prediction and binary classification of stock prices for four different companies, namely Apple, Visa, Johnson and Jonson, and Honeywell. We primarily used the real-time stock data of the raw stock prices of these companies. We compared various Quantum Computing techniques with their classical counterparts in terms of accuracy and F-score of the prediction model. Through these experimental simulations, we shed light on the potential advantages and limitations of Quantum Algorithms in stock price prediction and contribute to the growing body of knowledge at the intersection of Quantum Computing and Finance.