Work

Predicting FX market movements using GAN with limit order event data

Year: 2024

Type: article

Abstract: • GAN can predict a 5-minute FX return. • GAN with limit order events performs best. • Limit orders contribute to price discovery of FX rates. This study employs generative adversarial network (GAN) models to forecast 5-minute foreign exchange (FX) rate returns. Compared to the Long Short-Term Memory (LSTM) model, GAN demonstrates a significant economic advantage. Notably, the GAN that incorporates limit order events outperforms those that consider liquidity and market order variables. Additionally, the GAN with limit orders achieves tangible economic gains. Consequently, this study provides empirical evidence that adds to the existing literature on market structure regarding informed trading through limit orders.

Source: Finance research letters

DOI: 10.1016/j.frl.2024.106527

Authors: Kexin Peng, Hitoshi Iima, Yoshihiro Kitamura

Institutions: Kyoto Institute of Technology, Waseda University

Language: English

Topic: Stock Market Forecasting Methods

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,350

Funder: Japan Society for the Promotion of Science