Forecasting digital asset return: an application of machine learning model

Article


Ciciretti, V., Pallotta, A., Lodh, S., Senyo, P.K. and Nandy, M. 2024. Forecasting digital asset return: an application of machine learning model. International Journal of Finance & Economics. https://doi.org/10.1002/ijfe.3062
TypeArticle
TitleForecasting digital asset return: an application of machine learning model
AuthorsCiciretti, V., Pallotta, A., Lodh, S., Senyo, P.K. and Nandy, M.
Abstract

In this study, we aim to identify the machine learning model that can overcome the limitations of traditional statistical modelling techniques in forecasting Bitcoin prices. Also, we outline the necessary conditions that make the model suitable. We draw on a multivariate large data set of Bitcoin prices and its market microstructure variables and apply three machine learning models, namely double deep Q-learning, XGBoost and ARFIMA-GARCH. The findings show that the double deep Q-learning model outperforms the others in terms of returns and Sortino ratio and is capable of one-step-ahead sign forecast of the returns even on synthetic data. These critical insights in forecasting literature will support practitioners and regulators to identify an economically viable cryptocurrency forecasting return model.

Keywordsmachine learning ; artificial intelligence; finance; econometrics
Sustainable Development Goals9 Industry, innovation and infrastructure
Middlesex University ThemeCreativity, Culture & Enterprise
PublisherWiley
JournalInternational Journal of Finance & Economics
ISSN
Electronic1099-1158
Publication dates
Online18 Nov 2024
Publication process dates
Submitted21 Mar 2023
Accepted12 Oct 2024
Deposited31 Jan 2025
Output statusPublished
Accepted author manuscript
File Access Level
Open
Copyright Statement

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

Digital Object Identifier (DOI)https://doi.org/10.1002/ijfe.3062
LanguageEnglish
Permalink -

https://repository.mdx.ac.uk/item/1zx2x4

  • 22
    total views
  • 8
    total downloads
  • 1
    views this month
  • 0
    downloads this month

Export as

Related outputs

Network risk parity: graph theory-based portfolio construction
Ciciretti, V. and Pallotta, A. 2024. Network risk parity: graph theory-based portfolio construction. Journal of Asset Management. 25 (2), pp. 136-146. https://doi.org/10.1057/s41260-023-00347-8
Should you use GARCH models for forecasting volatility? A comparison to GRU neural networks
Pallotta, A. and Ciciretti, V. 2024. Should you use GARCH models for forecasting volatility? A comparison to GRU neural networks. Studies in Nonlinear Dynamics & Econometrics. 28 (5), pp. 725-738. https://doi.org/10.1515/snde-2022-0025
Stemming the tide: Does climate risk affect M&A performance?
Lodh, S., Deshmukh, N. and Rohani, A. 2024. Stemming the tide: Does climate risk affect M&A performance? Business Strategy and the Environment. 33 (2), pp. 858-881. https://doi.org/10.1002/bse.3518
Editorial entrepreneurial finance for green innovative SMEs
Owen, R., Botelho, T., Mac an Bhaird, C., Hussain, J., Pierrakis, Y., Scott, J. and Lodh, S. 2023. Editorial entrepreneurial finance for green innovative SMEs. IEEE Transactions on Engineering Management. 70 (3), pp. 942-949. https://doi.org/10.1109/TEM.2022.3224870
SME Financing for Biodiversity: Building Nature Measurement and Impacts into SME Financing (‘SME FinBio’)
Owen, R., Lyon, F., Burnett, A. and Lodh, S. 2022. SME Financing for Biodiversity: Building Nature Measurement and Impacts into SME Financing (‘SME FinBio’). Natural Environment Research Council (NERC).
Influence of governance bundles and directors' social capital on cash holding in foreign cross-listed firms
Lodh, S., Nandy, M. and Kaur, J. 2023. Influence of governance bundles and directors' social capital on cash holding in foreign cross-listed firms. International Journal of Finance & Economics. 28 (4), pp. 4271-4298. https://doi.org/10.1002/ijfe.2650
Stock co-movement and governance bundles: Does the quality of national governance moderate this relationship?
Egwuonwu, A., Lodh, S. and Nandy, M. 2023. Stock co-movement and governance bundles: Does the quality of national governance moderate this relationship? International Journal of Finance & Economics. 28 (3), pp. 530-2548. https://doi.org/10.1002/ijfe.2548
Exploring external finance to build back better a green UK SME economy
Owen, R., Lodh, S., Anwar, O. and Plekhanov, S. 2022. Exploring external finance to build back better a green UK SME economy. Enterprise Research Centre.
Policy briefing: Exploring external finance to build back better a green UK SME economy
Owen, R., Lodh, S., Anwar, O. and Plekhanov, S. 2022. Policy briefing: Exploring external finance to build back better a green UK SME economy. Enterprise Research Centre.
Corporate accountability towards species extinction protection: insights from ecologically forward-thinking companies
Roberts, L., Nandy, M., Hassan, A., Lodh, S. and Elamer, A. 2022. Corporate accountability towards species extinction protection: insights from ecologically forward-thinking companies. Journal of Business Ethics. 178 (3), pp. 571-595. https://doi.org/10.1007/s10551-021-04800-9
Coupling of cryptocurrency trading with the sustainable environmental goals: is it on the cards?
Mustafa, F., Lodh, S., Nandy, M. and Kumar, V. 2022. Coupling of cryptocurrency trading with the sustainable environmental goals: is it on the cards? Business Strategy and the Environment. 31 (3), pp. 1152-1168. https://doi.org/10.1002/bse.2947
The future of non-financial businesses reporting: learning from the Covid-19 pandemic
Hassan, A., Elamer, A., Lodh, S., Roberts, L. and Nandy, M. 2021. The future of non-financial businesses reporting: learning from the Covid-19 pandemic. Corporate Social Responsibility and Environmental Management. 28 (4), pp. 1231-1240. https://doi.org/10.1002/csr.2145
A reply to the discussion of “How does culture impinge upon managers’ demeanor of earnings management? Evidence from cross-country analysis” [Letter]
Chaney, P., Lodh, S. and Nandy, M. 2021. A reply to the discussion of “How does culture impinge upon managers’ demeanor of earnings management? Evidence from cross-country analysis” [Letter]. The International Journal of Accounting. 56 (02). https://doi.org/10.1142/s109440602180007x
An investigation of UK SME access to finance, growth and productivity, 2015-2017 - ERC Research Paper 79
Owen, R., Botelho, T., Anwar, O., Harrer, T. and Lodh, S. 2019. An investigation of UK SME access to finance, growth and productivity, 2015-2017 - ERC Research Paper 79. Enterprise Research Centre (ERC).
Impact of directors’ networks on corporate social responsibility: a cross country study
Nandy, M., Lodh, S., Kaur, J. and Wang, J. 2020. Impact of directors’ networks on corporate social responsibility: a cross country study. International Review of Financial Analysis. 72, pp. 1-22. https://doi.org/10.1016/j.irfa.2020.101601
Lessons from COVID-19 and a resilience model for higher education
Nandy, M., Lodh, S. and Tang, A. 2020. Lessons from COVID-19 and a resilience model for higher education. Industry and Higher Education. https://doi.org/10.1177/0950422220962696
Does lobbying of firms complement executive networks in determining executive compensation?
Nandy, M., Lodh, S., Wang, J. and Kaur, J. 2021. Does lobbying of firms complement executive networks in determining executive compensation? International Journal of Finance & Economics. 26 (3), pp. 4137-4162. https://doi.org/10.1002/ijfe.2008
The comprehensive environmental management model in post-Covid19 era
Nandy, M., Marocchi, G., Lodh, S. and Corradini, A. 2020. The comprehensive environmental management model in post-Covid19 era. Journal of Business and Management Studies. 1 (1), pp. 1-15.
Post Covid-19 and business analytics
Nandy, M. and Lodh, S. 2020. Post Covid-19 and business analytics. in: Joshi, A., Dey, N. and Santosh, K. (ed.) Intelligent Systems and Methods to Combat Covid-19 Springer Singapore. pp. 83-91
How does culture impinge upon managers' demeanor of earnings management? Evidence from cross-country analysis
Chaney, P., Lodh, S. and Nandy, M. 2021. How does culture impinge upon managers' demeanor of earnings management? Evidence from cross-country analysis. The International Journal of Accounting. 56 (02). https://doi.org/10.1142/S1094406021500098
How has the global financial crisis affected syndicated loan terms in emerging markets? Evidence from China
Caporale, G., Lodh, S. and Nandy, M. 2018. How has the global financial crisis affected syndicated loan terms in emerging markets? Evidence from China. International Journal of Finance & Economics. 23 (4), pp. 478-491. https://doi.org/10.1002/ijfe.1633
Do banks value the eco-friendliness of the firms in their corporate lending decisions? Some empirical evidence
Nandy, M. and Lodh, S. 2012. Do banks value the eco-friendliness of the firms in their corporate lending decisions? Some empirical evidence. International Review of Financial Analysis. 25, pp. 83-93. https://doi.org/10.1016/j.irfa.2012.06.008
Fair value in the professional valuation: concept and models
Artemenkov, A., Lodh, S. and Nandy, M. 2018. Fair value in the professional valuation: concept and models. International Journal of Critical Accounting. 10 (6), pp. 427-446. https://doi.org/10.1504/IJCA.2018.098262
The performance of banks in the MENA region during the global financial crisis
Caporale, G., Lodh, S. and Nandy, M. 2017. The performance of banks in the MENA region during the global financial crisis. Research in International Business and Finance. 42, pp. 583-590. https://doi.org/10.1016/j.ribaf.2017.07.003
Gender inequality and disabled inclusivity in accounting higher education and profession during financial crisis
Lodh, S. and Nandy, M. 2017. Gender inequality and disabled inclusivity in accounting higher education and profession during financial crisis. Industry and Higher Education. 31 (5), pp. 335-347. https://doi.org/10.1177/0950422217725227
The impact of international financial reporting standards adoption on earnings management: evidence from EU countries
Lodh, S. and Nandy, M. 2017. The impact of international financial reporting standards adoption on earnings management: evidence from EU countries. in: Ekanem, I. (ed.) Understanding Bankruptcy: Global Issues, Perspectives and Challenges Nova Science Publishers. pp. 173-194
Accrual-based and real earnings management and political connections
Braam, G., Nandy, M., Weitzel, U. and Lodh, S. 2015. Accrual-based and real earnings management and political connections. The International Journal of Accounting. 50 (2), pp. 111-141. https://doi.org/10.1016/j.intacc.2013.10.009
Technological breadth and depth of knowledge in innovation: the role of mergers and acquisitions in biotech
Lodh, S. and Battaggion, M. 2015. Technological breadth and depth of knowledge in innovation: the role of mergers and acquisitions in biotech. Industrial and Corporate Change. 24 (2), pp. 383-415. https://doi.org/10.1093/icc/dtu013
Innovation and family ownership: empirical evidence from India
Lodh, S., Nandy, M. and Chen, J. 2014. Innovation and family ownership: empirical evidence from India. Corporate Governance: an International Review. 22 (1), pp. 4-23. https://doi.org/10.1111/corg.12034
Do banks value the eco-friendliness of firms in their corporate lending decision? Some empirical evidence
Nandy, M. and Lodh, S. 2012. Do banks value the eco-friendliness of firms in their corporate lending decision? Some empirical evidence. International Review of Financial Analysis. 25, pp. 83-93. https://doi.org/10.1016/j.irfa.2012.06.008