VAR-GRU: A Hybrid Model for Multivariate Financial Time Series Prediction

• Main Authors: Lkhagvadorj Munkhdalai, Meijing Li, Nipon Theera-Umpon, Sansanee Auephanwiriyakul, Keun Ho Ryu
• Format: Book Series
• Published: 2020
• Subjects: Computer Science; Mathematics
• Online Access: https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85082385074&origin=inward; http://cmuir.cmu.ac.th/jspui/handle/6653943832/68349
• Institution: Chiang Mai University

© 2020, Springer Nature Switzerland AG. A determining the most relevant variables and proper lag length are the most challenging steps in multivariate time series analysis. In this paper, we propose a hybrid Vector Autoregressive and Gated Recurrent Unit (VAR-GRU) model to find the contextual variables and suitable lag length to improve the predictive performance for financial multivariate time series. VAR-GRU approach consists of two layers, the first layer is a VAR model-based variable and lag length selection and in the second layer, the GRU-based multivariate prediction model is trained. In the VAR layer, the Akaike Information Criterion (AIC) is used to select VAR order for finding the optimal lag length. Then, the Granger Causality test with the optimal lag length is utilized to define the causal variables to the second layer GRU model. The experimental results demonstrate that the ability of the proposed hybrid model to improve prediction performance against all base predictors in terms of three evaluation metrics. The model is validated over real-world financial multivariate time series dataset.