Enhancing Accuracy in Stock Price Prediction: The Power of Optimization Algorithms

Abstract

The purpose of this research was to improve the accuracy of stock price prediction by implementing optimization algorithms on forecasting methods, in this case, the exponential smoothing method. This research implemented the Particle Swarm Optimization (PSO) and Bat Algorithm metaheuristic optimization algorithms to determine the single-exponential smoothing method’s smoothing parameters. Before implementing the optimization algorithm, the way to determine the smoothing parameters was by trial-and-error method, which is considered less effective. Therefore, the novelty of this research is tuning the parameters of the exponential smoothing method using a comparison of two metaheuristic algorithms, namely the particle swarm optimization algorithm compared to the bat algorithm. The Single Exponential Smoothing method with PSO and Bat algorithms was proven to improve accuracy. The alpha parameter found by the PSO algorithm is 0.9346, and the bat algorithm is 0.936465. With a MAPE of 1.0311%, it was better than the MAPE generated in the Single Exponential smoothing method by trial and error of 1.0316%. This research contributes to providing insight that in a highly sensitive stock prediction situation, metaheuristic algorithms can be used to create more accurate and efficient prediction results.