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SSRN Electronic Journal
Article . 2023 . Peer-reviewed
Data sources: Crossref
https://dx.doi.org/10.48550/ar...
Article . 2023
License: arXiv Non-Exclusive Distribution
Data sources: Datacite
DBLP
Preprint . 2023
Data sources: DBLP
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Transformers Versus LSTMs for Electronic Trading

Authors: Paul Bilokon; Yitao Qiu;

Transformers Versus LSTMs for Electronic Trading

Abstract

With the rapid development of artificial intelligence, long short term memory (LSTM), one kind of recurrent neural network (RNN), has been widely applied in time series prediction. Like RNN, Transformer is designed to handle the sequential data. As Transformer achieved great success in Natural Language Processing (NLP), researchers got interested in Transformer's performance on time series prediction, and plenty of Transformer-based solutions on long time series forecasting have come out recently. However, when it comes to financial time series prediction, LSTM is still a dominant architecture. Therefore, the question this study wants to answer is: whether the Transformer-based model can be applied in financial time series prediction and beat LSTM. To answer this question, various LSTM-based and Transformer-based models are compared on multiple financial prediction tasks based on high-frequency limit order book data. A new LSTM-based model called DLSTM is built and new architecture for the Transformer-based model is designed to adapt for financial prediction. The experiment result reflects that the Transformer-based model only has the limited advantage in absolute price sequence prediction. The LSTM-based models show better and more robust performance on difference sequence prediction, such as price difference and price movement.

Keywords

FOS: Economics and business, FOS: Computer and information sciences, Computer Science - Machine Learning, Quantitative Finance - Trading and Market Microstructure, Statistical Finance (q-fin.ST), Econometrics (econ.EM), Quantitative Finance - Statistical Finance, Economics - Econometrics, Trading and Market Microstructure (q-fin.TR), Machine Learning (cs.LG)

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
23
Top 10%
Top 10%
Top 10%
Green