System and method for forecasting fluctuations in future data and particularly for forecasting security prices by news analysis

• US 20090024504A1
• Filed: 05/02/2008
• Published: 01/22/2009
• Est. Priority Date: 05/02/2007
• Status: Abandoned Application

• Current Assignee: Ariel Gilder, Kevin Lerman
• Original Assignee: Ariel Gilder, Kevin Lerman
• Inventors: Gilder, Ariel, Lerman, Kevin
• Application Number:
  US12/150,960
• Publication Number:
  US 20090024504A1
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A system and method for predicting price fluctuations in financial markets. Our approach utilizes both market history and public news articles, published before the beginning of trading each day, to produce a set of recommended investment actions. We empirically show that these markets are surprisingly predictable, even by purely market-historical techniques. Furthermore, analyzing relevant news articles captures information features independent of the markets history, and combining the two methods significantly improves results. Capturing usable features from news articles requires some linguistic sophistication the standard naïve bag-f-words approach does not yield predictive features. Instead, we use part-of-speech tagging, dependency parsing and semantic role labeling to generate features that improve system accuracy. We evaluate our system on eight political prediction markets from 2004 and show that we can make effective investment decisions based on our systems predictions, whose profits greatly exceed those generated by a baseline system.

Claims

1. A method of predicting the future performance of one or more predefined securities, the method including:

receiving raw data representing language including sentences relating to one or more predefined securities whose future performance is to be predicted;

scanning the raw data for references to one or more of the predefined securities and providing the reference as a standard representation thereof;

preprocessing the sentences containing references to at least one of said one or more predefined securities to provide a relationship structure of one or more words in the preprocessed sentences; and

providing a training model for one or more of the relationship structures to predict future performance of one or more of the predefined securities.

2. The method of claim 1 in which the future performance being predicted is price movement.

3. The method of claim 1 in which said training model uses multiple copies of relationship structures for certain past trading days in proportion to price movements on said certain days.

4. The method of claim 1 also including:

receiving data representing price movement of certain past trading days; and

using said data representing price movement of certain past trading days to modify said prediction of future performance of one or more of said predefined securities