Paper: A differential evolution-based regression framework for forecasting Bitcoin price

Paper: A differential evolution-based regression framework for forecasting Bitcoin price


Debojyoti Das, R.K. Jana, Indranil Ghosh

Journal: Annals of Operations Research

Cryptocurrency such as Bitcoin is well known for its hedging, portfolio diversification, and risk mitigation capabilities across the literature. Bitcoin has drawn the attention of crucial market players at different hierarchies for accomplishing these activities. Simultaneously, the literature predominantly reports Bitcoin’s return behavior as chaotic and multifractal, and more volatile than other financial assets. This research proposes a differential evolution-based regression framework for forecasting one day-ahead price of Bitcoin. The maximal overlap discrete wavelet transformation first decomposes the original series into granular linear and nonlinear components. We then fit polynomial regression with interaction (PRI) and support vector regression (SVR) on linear and nonlinear components and obtain component-wise projections. The sum of these projections constitutes the final forecast. For accurate predictions, the PRI coefficients and tuning of the hyperparameters of SVR must be precisely estimated. Differential evolution, a metaheuristic optimization technique, helps to achieve these goals.

The researchers compare the forecast accuracy of the proposed regression framework with six advanced predictive modeling algorithms- multilayer perceptron neural network, random forest, adaptive neural fuzzy inference system, standalone SVR, multiple adaptive regression spline, and least absolute shrinkage and selection operator.

Finally, they perform the numerical experimentation based on—(1) the daily closing prices of Bitcoin for January 10, 2013, to February 23, 2019, and (2) randomly generated surrogate time series through Monte Carlo analysis. The forecast accuracy of the proposed framework is higher than the other predictive modeling algorithms.

EASYSENDY.com