Does Machine Learning Forecast Investor’s Risk Appetite?

Abstract

Risk appetite is an important indicator that is monitored with interest by financial market participants. One of the risk appetite indices is nominated “RISE risk appetite index” calculated to measure the riskiness of the Turkey market in general. There are very limited studies in the literature on RISE risk appetite, and most of them use simple econometric methods to predict the risk appetite. To the best of our knowledge, there is no study using machine learning algorithms. Therefore, it creates curiosity on how the success will be in estimating the risk appetite using machine learning algorithms. Thus, the aim of this paper is to measure the estimation success of the RISE index using Long Short-term Memory (LSTM) and Multi-Layer Perceptron (MLP). The analysis is based on a weekly frequency dataset covering the years 2008 to 2023. The results are compared as per RMSE values, and LSTM presents rather high prediction success compared to MLP. Due to the forecasting ability of BIST 100 index on RISE, the current and lagged values of BIST 100 are compared, and lagged values of BIST 100 are found to have a higher ability to estimate RISE, approximately twice as much as current values. It is expected that this valuable finding will be a guide for market participants and financial analysts to shape their investment preferences by using deep learning algorithms in predicting market expectations and to make well-directed investments.

Keywords

• Risk Appetite
• RISE Index
• Forecasting
• LSTM
• MLP

Makine Öğrenmesi Yatırımcının Risk İştahını Öngörür mü?

Öz

Risk iştahı, finansal piyasa katılımcıları tarafından ilgiyle izlenen önemli bir göstergedir. Risk iştahı endekslerinden biri olan "RISE risk iştahı endeksi", genel olarak Türkiye piyasasının risk derecesini ölçmek için hesaplanmaktadır. Literatürde RISE risk iştahıyla ilgili sınırlı sayıda çalışma bulunmakta ve bu çalışmaların çoğu, risk iştahını tahmin etmek için basit ekonometrik yöntemleri kullanmaktadır. Bildiğimiz kadarıyla, makine öğrenmesi algoritmalarını kullanan bir çalışmaya rastlanmamıştır. Bu nedenle, makine öğrenmesi algoritmaları kullanılarak risk iştahının tahminlenmesi merak uyandırmaktadır. Bu çalışmanın amacı, RISE endeksinin tahmin başarısını Uzun Kısa Süreli Hafıza (LSTM) ve Çok Katmanlı Algılayıcı (MLP) kullanarak ölçmektir. Analiz, 2008'den 2023'e kadar olan yılları kapsayan haftalık frekanslı veri setine dayanmaktadır. Sonuçlar, RMSE değerlerine göre karşılaştırılmış olup, LSTM algoritması MLP'ye kıyasla daha yüksek bir tahminleme başarısı sunmaktadır. RISE endeksi üzerinde BIST 100 endeksinin tahmin yeteneği göz önüne alındığında ise BIST 100 endeksinin mevcut ve gecikmiş değerleri karşılaştırılmış ve gecikmeli BIST 100 değerlerinin RISE' ı tahmin etme yeteneğinin, mevcut değerlere göre yaklaşık olarak iki kat daha yüksek olduğu belirlenmiştir. Bu değerli bulgunun, piyasa katılımcılarına ve finansal analistlere, piyasa beklentilerini tahmin etmede derin öğrenme algoritmalarını kullanarak yatırım tercihlerini şekillendirmelerine ve doğru yatırımlar yapmalarına rehberlik edeceği beklenmektedir.

Anahtar Kelimeler

• Risk İştahı
• RISE Endeksi
• Tahminleme
• LSTM
• MLP

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