Abstract
The study tries to estimate the returns using three known models, namely the single-index model, capital asset pricing model (CAPM), and arbitrage pricing theory (APT) model. The data for the study was taken from Nifty. The top 100 large-cap stocks were taken into account. The Nifty index was taken as the proxy for the market return. All data was taken with one period lag to make it stationary. These models are subjected to three software-based machine learning, namely decision tree, neural network, and ordinary least square. The results were iterated from the three best returns, and the area of the curve was estimated. The academic point score for the area was taken into consideration. The value 0.8 was taken as the cutoff for the acceptance of the model. The result shows that CAPM outperforms all the models used under different machine learning mechanisms. In the process, it was observed that the arbitrage pricing theory model too performs well. However, while we use the ordinary least square, the single-index model has the best performance. It is kind of a foregone conclusion since the single-index model is based on the return of stock and is close to paper trading.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Snoek J, Larochelle H, Adams RP (2012) Practical bayesian optimization of machine learning algorithms. In: Advances in neural information processing systems, pp 2951–2959
Hargreaves C, Reddy V (2017) Machine learning application in the financial markets industry. Indian J Sci Res 17(1):253–256
Dutta A, Sinha M, Gahan P (2020) Perspective of the behaviour of retail investors: an analysis with Indian Stock Market Data. In: Computational intelligence in data mining. Springer, Singapore, pp 605–616
Fernández-Delgado M, Cernadas E, Barro S, Amorim D (2014) Do we need hundreds of classifiers to solve real world classification problems? J Mach Learn Res 15(1):3133–3181
Chandrashekar G, Sahin F (2016) A survey on feature selection methods. Int J Comput Electr Eng 8:34–56
Kazemi V, Sullivan J (2014) One millisecond face alignment with an ensemble of regression trees. In: Proceedings of the IEEE conference on computer vision and pattern recognition. pp 1867–1874
Woźniak M, Graña M, Corchado E (2014) A survey of multiple classifier systems as hybrid systems. Inf Fusion 16:3–17
Gong Y, Wang L, Guo R, Lazebnik S (2014) Multi-scale orderless pooling of deep convolutional activation features. In: European conference on computer vision. Springer, Cham, pp 392–407
Sharpe WF (1963) A simplified model for portfolio analysis. Manage Sci 9(2):277–293
Tsai CF, Wang SP (2009) Stock price forecasting by hybrid machine learning techniques. In: Proceedings of the international multiconference of engineers and computer scientists, vol 1, no 755, p 60
Quah TS (2008) DJIA stock selection assisted by neural network. Expert Syst Appl 35(1–2):50–58
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.
About this paper
Cite this paper
Dutta, A., Sinha, M. (2022). Comparative Asset Pricing Models Using Different Machine Learning Tools. In: Ranganathan, G., Bestak, R., Palanisamy, R., Rocha, Á. (eds) Pervasive Computing and Social Networking. Lecture Notes in Networks and Systems, vol 317. Springer, Singapore. https://doi.org/10.1007/978-981-16-5640-8_55
Download citation
DOI: https://doi.org/10.1007/978-981-16-5640-8_55
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-16-5639-2
Online ISBN: 978-981-16-5640-8
eBook Packages: Intelligent Technologies and RoboticsIntelligent Technologies and Robotics (R0)