Financial Time-Series Forecasting: Towards Synergizing Performance And Interpretability Within a Hybrid Machine Learning Approach

TL;DR

This paper compares hybrid machine learning models for Bitcoin price prediction, emphasizing model interpretability through various preprocessing techniques, and finds linear regression performs best among tested models.

Contribution

It introduces a systematic comparison of hybrid ML algorithms for cryptocurrency forecasting and highlights the importance of interpretability with advanced preprocessing methods.

Findings

Linear regression achieves the best predictive performance.

Preprocessing techniques reveal latent relations in financial time-series.

The study enhances understanding of model interpretability in crypto forecasting.

Abstract

In the realm of cryptocurrency, the prediction of Bitcoin prices has garnered substantial attention due to its potential impact on financial markets and investment strategies. This paper propose a comparative study on hybrid machine learning algorithms and leverage on enhancing model interpretability. Specifically, linear regression(OLS, LASSO), long-short term memory(LSTM), decision tree regressors are introduced. Through the grounded experiments, we observe linear regressor achieves the best performance among candidate models. For the interpretability, we carry out a systematic overview on the preprocessing techniques of time-series statistics, including decomposition, auto-correlational function, exponential triple forecasting, which aim to excavate latent relations and complex patterns appeared in the financial time-series forecasting. We believe this work may derive more attention and inspire more researches in the realm of time-series analysis and its realistic applications.