Gated Deeper Models are Effective Factor Learners
Jingjing Guo
Precisely forecasting the excess returns of an asset (e.g., Tesla stock) is
beneficial to all investors. However, the unpredictability of market dynamics,
influenced by human behaviors, makes this a challenging task. In prior
research, researcher have manually crafted among of factors as signals to guide
their investing process. In contrast, this paper view this problem in a
different perspective that we align deep learning model to combine those human
designed factors to predict the trend of excess returns. To this end, we
present a 5-layer deep neural network that generates more meaningful factors in
a 2048-dimensional space. Modern network design techniques are utilized to
enhance robustness training and reduce overfitting. Additionally, we propose a
gated network that dynamically filters out noise-learned features, resulting in
improved performance. We evaluate our model over 2,000 stocks from the China
market with their recent three years records. The experimental results show
that the proposed gated activation layer and the deep neural network could
effectively overcome the problem. Specifically, the proposed gated activation
layer and deep neural network contribute to the superior performance of our
model. In summary, the proposed model exhibits promising results and could
potentially benefit investors seeking to optimize their investment strategies.