683

 
原著論文  Original Paper 

Short-term Stock Price Analysis Based on Order Book

Information
Kenichi Yoshida Graduate School of Business Science, University of Tsukuba, Japan
yoshida@gssm.otsuka.tsukuba.ac.jp

Akito Sakurai Graduate School of Science and Technology, Keio University, Japan
sakurai@ae.keio.ac.jp

keywords: efficient market hypothesis, high-frequency trading, time series analysis, stock market prediction, technical
analysis

Summary
Efficient market hypothesis is widely accepted in financial market studies and entails the unpredictability of
future stock prices. In this study, we show that a simple analysis can classify short-term stock price changes with
an 82.9% accuracy. Our analysis uses the order book information of high-frequency trading. The volume of high-
frequency trading, which is responsible for short-term stock price changes, is increasing dramatically; therefore,
our study suggests the importance of analyzing short-term market fluctuations, an aspect that is not well studied in
conventional market theories. The experimental results also suggest the importance of the new data representation and
analysis methods we propose, neither of which have been thoroughly investigated in conventional financial studies.

1. Introduction financial studies. However, the results were not pleasing.

Efficient market hypothesis (EMH [Basu 77]) is widely
accepted in financial market studies. It asserts that finan-
cial markets are “informationally efficient.” As a conse-
quence, future stock prices change randomly. In other
words, they are unpredictable [Malkiel 99].
In this study, we show that a simple analysis can predict
short-term stock prices with an 82.9% accuracy. The vol-
ume of high-frequency trading (HFT [Chlistalla 11]) is in-
creasing dramatically; therefore, an analysis of short-term
stock returns is increasingly important. Our results sug-
gest the importance of analyzing the short-term market by
showing unexpected prediction accuracy.
Our analysis uses order book information from the Tokyo
stock exchange (TSE, the third largest stock exchange in
the world [Tokyo stock exchange 12]) from Jan. 2010 to
May 2014. The total amount of data analyzed was approx-
imately 6 terabytes. The volume of order book informa-
tion clearly reflects the increase in HFT. Although these
trading records are neither small nor easy to analyze, re-
cent developments in high-performance computing (i.e.,
“big data” processing), enables an analysis of this magni-
tude and complexity to be performed.
During our study, we attempted to use common tech-
niques and data representations used in most conventional
This indicated that we would have to extract information
from UDP packets by designing new data representation
methods. The poor prediction ability of conventional tech-
niques suggests the importance of a new approach toward
data representation and analysis techniques.
Chapter 2 of this paper first surveys and analyzes related
work to determine the limitations of existing approaches
to clarify the motivation of this research. Chapter 3 ex-
plains the proposed data representation and the analytical
method. Chapter 4 reports on the experimental results.
Chapter 5 discusses related topics. Finally, Chapter 6 con-
cludes our findings.
2. Related Works
EMH asserts that future stock prices are difficult to pre-
dict. However, some researchers have challenged this state-
ment (e.g., [Huang 94, Gallagher 02, Chordia 04, Gilbert
10, Gay Jr 11, Hsu 10, Menkhoff 10, Deng 15]). For ex-
ample, [Huang 94] and [Chordia 04] analyzed relation-
ship between individual stock returns and order imbal-
ance. [Huang 94] extracted prediction rules, and [Chor-
dia 04] made regression model. However, none of them
reported the prediction model for HFT with comparative
accuracy reported in this paper. The recent use of social
684 人工知能学会論文誌 30 巻 5 号 F（2015 年）

network services (SNSs, e.g., Twitter) data also has been Arrownet

studied (e.g., [Bollen 11, Sprenger 13, Sul 14, Deng 14]). User
TSE Router Router
Studies based on SNS data seem to analyze the occurrence System

of information asymmetry. These studies analyze the in- UDP packet

formation propagation process through SNSs and found ID Stock ID Ask/Bid Info. Ask/Bid Info. ...
situations in which information asymmetry exists. Infor-
mation symmetry is an important assumption of EMH;
therefore, a prediction ability in such a situation is not sur- Time Ask Size Ask Price Bid Size Bid Price

prising.
Fig. 1 Information in Arrownet UDP packets

In our study, we aim to find situations in which infor-

Table 1 A sample order book
mation asymmetry exists in HFT. The order book is the
source of information from which we try to determine the
asymmetry. The order book contains information about Ask Size Price Bid Size
ask and bid orders for each stock at a certain price. Each ... ...
order represents the price that each trader recognizes as 800 2026
being adequate. In HFT, each trader experiences a dif- 600 2015
ferent time lag when processing information. Even with 300 2000
high-speed computers and with a high-speed network con- 1965 100
nection, such asynchrony is inevitable. With an adequate 1955 200
data representation, we try to analyze the effects of such 1950 1800
asynchrony. ... ...

As the amount of HFT is increasing, there has been a

proliferation of primers and introductory handbooks on
this topic (such as [Lewis 14] and [Patterson 13]). How-
ever, there still exists room for a comprehensive study of
the characteristics of HFT. For example, to the best our
knowledge, there is no simple report on the predictabil-
ity of stock returns through HFT. EMH might discourage
such studies. Current studies analyze different aspects,
such as liquidity that formed the subject of [Beltran-Lopez
12] and [Danielsson 12].
In conventional studies of the financial market, meth-
ods from statistics and signal processing, such as the auto- an order book for the stock (see Table 1 for example). A
regressive (AR) model [Champernowne 48], the auto-regressive comparison of the current packet with its predecessor for
moving average (ARMA) model [Box 13], and the auto-
regressive integrated moving average (ARIMA) model [Box
13] are used. These methods model time series data with
a simple combination of elementary functions. For exam-
ple, the AR model represents a sequence of events over
time as yt = φyt−1 + wt . This equation relates the value
assumed by y at time t to another variable wt and to the
value y at the previous time. Here, t represents a moment
in time based on a fixed time interval. Our experimental
results show the inappropriateness of these conventional
approaches, and suggest the importance of the proposed
new data representation and analysis methods.
3. Order Book and its Representation
3·1 Order book in Arrownet
The TSE has been distributing real-time stock exchange
information through a high-speed trading network named
“Arrownet” since Jan. 2010 [Tokyo stock exchange 12].
When the TSE processes an order, it sends a UDP packet
that contains information about the order, i.e., the stock
ID, size of order, and ask/bid price. In particular, each
UDP packet contains the eight lowest ask orders and eight
highest bid orders (See Figure 1). The packet can therefore
be described as a list of orders that records the interest of
buyers and sellers on a particular stock, and is essentially
the same stock enables the extraction of the information of
the corresponding order.
Figure 2 compares the data representations of orders.
As explained before, each UDP packet corresponds to a
single order. Figure 2 (1) shows the actual order events
in real world trading. In the real world, each order event
occurs at a random interval. On the contrary, conven-
tional methods use fixed intervals, as shown in Figure 2
(2), which shows a typical time series representation of
the same order events. Because a fixed interval is used to
represent data, the timing information of events is lost in
this representation.
Short-term Stock Price Analysis Based on Order Book Information 685

(1) Arrownet (Real World Trade Status) 0.8

AVE vs. AM
B1 B1 AVE vs. PM
A1 B2 0.6
A4 B3
A2 Quoted price
A3 A3
0.4

Correlation Coefficient
t1 t2 t3 t4 t5 t6 t7 t8 t9 t10
Time
0.2
(2) Traditional Time Series Representaion
Q1 Q1 Q1 Q1 Q1 Q1 Q1 Quoted price 0
Q2 Q2 Q2
-0.2
t1 t2 t3 t4 t5 t6 t7 t8 t9 t10
Time
(3) Event-based Representaion 1 -0.4

E3 E9
E1 E5 -0.6
0 100 200 300 400 500 600 700
E6 E7
E2 Quoted price Sorted Order of Correlation Coefficients
E4 E8

Fig. 3 Correlation coefficients between AV Eam and returns

(4) Event-based Representaion 2

e1
e2
Quoted price
ries data has a poor prediction capability, whereas the pro-
Order Book Information
Time Quoted Price Number of Asks Number of Bids ...
posed representation has superior prediction abilities. We
will report the results of the preliminary experiments be-
Fig. 2 Representation of order events low.
To represent information stored in the event-based rep-
resentation, we first designed the following index AV Eam .
Although the conventional time series representation en-
16
ables mathematical analyses of quoted price changes, its (Price Leveli (t)−Quoted Price(t))∗(Size of Price Leveli (t)))
AV E t = i=1 16
(Size of Price Leveli (t))
use of a fixed time interval disregards the timing infor- i=1

mation of events. In addition, in most cases, it does not throughout morning

distinguish between ask and bid orders, but only repre-
sents the quoted price of the stock. In the example shown
in Figure 2 (1), the interval between events A2 and B1 is
short, but the interval between events B1 and A3 is much
longer. Such information is lost in the example shown in
Figure 2 (2). Furthermore, ask and bid orders are also not
distinguished in the example in Figure 2 (2).
To represent the information that is disregarded in con-
ventional time series representations, we have designed
two event-based representations (Figure 2 (3) and (4)).
Event-based representation 1 (Figure 2 (3)) represents the
order book information at the moment when each order
event is processed. In particular, it represents the stock
ID of the event, the most recently quoted price: ask/bid
size/price. Other information included in our design to
improve the analysis is also stored (See Section 4·1 for
details). Event-based representation 2 (Figure 2 (4)) repre-
sents the same information as event-based representation
1, but only the one at the time at which a trade of the stock
takes place.
3·2 Preliminary experiments
We conducted several preliminary experiments which
suggested that the conventional representation of time se-
AV E am = t at which an order is processed AV Et
AV Eam simply sums up the weighted difference between
ask/bid levels and the most recent quoted price of the stock
at the time when an order is processed. We tried to ex-
tract the interest of buyer and seller on the quoted price by
summing up AV Et stored in each UDP packet, i.e., each
order. Thereby, the price of the eight lowest ask orders
(i.e., ask price levels) and the eight highest bid orders (16
orders in total) are extracted from each UDP packet.
Figure 3 shows the Spearman’s rank correlation coeffi-
cients between AV Eam and the corresponding stock re-
turns. The coefficients were calculated by first selecting
the 100 most frequently traded stocks during the period
from 2010 to 2012 (3 years or 680 days). Then, we calcu-
lated the difference (dam ) between the first quoted price of
the morning period and the last quoted price of the morn-
ing period for each stock. Finally, we calculated Spear-
man’s rank correlation coefficient between AV Eam and
dam each day. “AVE vs. AM” in the figure shows the re-
sults. Here, the y-axis shows Spearman’s rank correlation
coefficients. The coefficients are sorted according to the
values. As shown in the figure, the data is weakly corre-
lated.
However, this weak correlation disappears when we cal-
686
culate the coefficient between AV Eam and the stock re-
turns for the afternoon period (i.e., the difference between
the last quoted price of the morning period and the last
quoted price of the day). The plot “AVE vs. PM” in Fig-
ure 3 shows the coefficients.
Although the non-existence of a correlation between
AV Eam and the afternoon returns suggests the impossi-
bility to predict returns even in half a day, the existence of
a weak correlation between AV Eam and the morning re-
turns suggests the possibility that short-term returns may
be predicted. If AV Eam did not have any relation with
stock returns, the difference between “AV Eam vs. AM”
and “AV Eam vs. PM” would lack reason for its occur-
rence. The observed difference seems to suggest the exis-
tence of a short-term correlation.
The next step in our study was to determine whether the
weak correlations are utilized by the conventional repre-
sentation, i.e, fixed interval representation of quoted prices.
We accomplished this by building the following linear re-
gression model learned by support vector regression (SVR):
Quoted Pricet+10 = wT Φ(xt ) + b + t
Here xt is the vector of Quoted Pricei and AV Ei (i =
t, t − 1, . . . , t − 30). The interval is one minute. Figure 4
shows the squared correlation coefficients of the true and
regressed Quoted Pricet , which are sorted in increasing
order. “With AVE” corresponds to the regression with
AV Ei s in explanatory variables and “Without AVE” cor-
responds to the regression without AV Ei s.
Although the weak correlations found in Figure 3 sug-
gest the existence of a short-term correlation, Figure 4
shows that the SVR model failed to reproduce it.
We summarize the results of the preliminary experiments
as follows. When the SVR model was trained to predict
future quoted prices using the time series data from the
previous 30 min by using the representation of conven-
tional time series analysis, the SVR model was unable to
confirm the existence of a weak short-term relationship,
even though the correlation analysis shown in Figure 3
suggests that such a relationship exists. This led us to con-
clude that the conventional time series data representation
is responsible for causing the SVR to perform poorly by
removing important information from the data. The event-
based representation shown in Figure 2 was inspired by
this observation.
人工知能学会論文誌 30 巻 5 号 F（2015 年）
0.0001
With AVE
Without AVE
Squared Correlation Coefficient
0.001
0.01
0.1
1
0 100 200 300 400 500 600 700
Sorted Order of Squard Correlation Coefficients
Fig. 4 SVR performance
4. Experimental Results using Event-based
Representation
4·1 Event-based representation and Attributes
This chapter reports the results of experiments that use
the TSE order book information from Jan. 2010 to May
2014. We analyzed the UDP packet information that was
exchanged through the high-speed trading network named
“Arrownet” [Tokyo stock exchange 12]. The total amount
of data that was analyzed was approximately 6 terabytes.
Event-based representations (Figure 2 (3) and (4)) were
used in the analysis.
The analysis used libSVM [Chang 11] and J48 (an im-
plementation of C4.5 in weka [Hall 09]). The default pa-
rameters were used in the experiments to solve the three
class problem (“up,” “down,” and “unchanged”). The at-
tributes that were used are:
Average price in orders: e1
As explained before, AV Et is the difference between
the most recent quoted price and the average price of
most recent orders. e1 is the sum of AV Et between
the time of the most recent trade and the time of the
current order.
Number of asks and bids: e2 , e3 , e4
Number of UDP packets for “ask (e2 )” and “bid (e3 )”
after the most recent trade. Here, e4 = e2 − e3 .
Number of lower asks and higher bids: e5 , e6 , e7
Number of UDP packets that ask with price lower
than the most recent quoted price (e5 ), and number
of UDP packets that bid with price higher than the
most recent quoted price (e6 ). e7 = e5 − e6 .
Number of lower bids and higher asks: e8 , e9 , e10
Number of UDP packets that ask with price higher
than the most recent quoted price (e8 ), and number of
Short-term Stock Price Analysis Based on Order Book Information
UDP packets that bid with price lower than the most
recent quoted price (e9 ). e10 = e8 − e9 .
Number of asks and bids with quoted price: e11 , e12 , e13
Number of UDP packets for ask and bid with the
same price as the most recent quoted price after the
corresponding trade (e11 , e12 ). e13 = e11 − e12 .
Differences between the recent quoted price
and its predecessor: e14
This may either be the latest difference or a series of
the values up to the four most recent differences.
As explained above, e1 is designed to capture the average
of peoples’ perception of the stock price. The variables
e2 , e3 , ..., e13 are designed to count the number of people
who wish to ask and bid and e14 is designed to express the
trend of the stock returns.
4·2 Classification accuracy based on order book infor-
mation
Figure 5 shows the average classification accuracy of
the direction of stock price changes based on the order
book information. These results are based on data from
the TSE from Jan. 2010 to May 2014. The 100 most fre-
quently traded stocks are used in the experiments. The
order book history for each stock is recorded at the time
when an order is processed. The values of quoted price,
ask/bid size and price are extracted from the data to make
the order history of each stock. Then subsequences of or-
der history, whose length are 10,000, are extracted to make
training sets. They are represented with event-based rep-
resentations 1 and 2. Using each training set, the SVM
and J48 models are trained to learn a classification model,
which solves a three class (i.e., price will go “up,” “down,”
or remain “unchanged”) problem. For each training set,
the subsequent 1000 orders are extracted to construct the
corresponding test set. Figure 5 shows the average predic-
tion accuracy.
ZeroR classifies all the data according to the mode of the
target variable in the training data. Because a few samples
are “unchanged” and about half of the samples are either
“up” or “down”, the classification accuracy of ZeroR is
approximately 50% as shown in Figure 5.
e 14 in Figure 5 shows the average classification accu-
racy (58.7%) by J48 which uses only e14 as the explana-
tory variable. We conducted the experiments by varying
the length of e14 to determine whether the classification
accuracy would be affected by the length of the quoted
price history. However, we found the prediction accuracy
did not differ much. Thus, we only used the most recent
e14 values as the data for the quoted price history.
“SVM R2” and “J48 R2” in Figure 5 show the average
687
ZeroR 49.8%
e_14 58.7%
SVM_R1 60.7%
J48_R1 61.9%
SVM_R2 74.5%
J48_R2 79.2%
0 20 40 60 80 100
Accuracy (%)
Fig. 5 Classification accuracy based on the order book
classification accuracy of SVM and J48 based on event-
based representation 2 with variables e1 , e2 , ..., e13 . The
result of “J48 R2” (i.e., 79.3%) clearly shows the classi-
fication ability of the order book information. Note that
“SVM R2” and “J48 R2” only use the most recent value
for e1 , e2 , ..., e13 and do not depend on its past history e14 .
The high classification accuracy of 79%, shown in Fig-
ure 5, requires careful explanation, because this result does
not suggest that there is a prediction method capable of
achieving a 79% prediction accuracy. The classification
was performed based on information extracted from the
latest UDP packet and possibly previous UDP packets.
The output of the learned classifier is the direction of pos-
sible quoted price changes by the order, i.e., the direction
of the quoted price changes if the order results in a trade,
or, otherwise, the direction of the quoted price changes in
future. In other words, the change has already been real-
ized once a trade has taken place; therefore, the output is
just a classification but not a prediction.
Although we will show the true prediction accuracy which
can be used in the actual trading shortly, the important
finding in Figure 5 is “Short-term stock return does not
walk randomly. The order book can classify stock return
movement.” We can use Arrownet to classify stock re-
turn movements in HFT. Thus, the famous assertion “in-
formational efficiency of financial markets” does not exist
in HFT. The time lag existing in computers and networks,
which is inescapable in HFT, may be a cause of such inef-
ficiency.
“SVM R1” and “J48 R1” show the average prediction
accuracy based on e1 , e2 , , ..., e13 . These results are based
on event-based representation 1. Under the representation,
the expected output, or the target output of each predic-
688
tion, is the direction of change of the next quoted price.
Therefore, this setting is close to actual trading. Though
the prediction accuracy is only relatively high (60.7% by
SVM and 61.9% by J48), it is higher than the result based
on the history of quoted prices (i.e., 58.7% of e 14 in Fig-
ure 5).
Although the results of the preliminary experimentation
shown in Figure 3 only suggest the prediction ability of or-
der book information, the results in Figure 5 clearly con-
firms this. We believe the latter is mainly caused by the
data representation we used. The results shown in Figure 4
exhibit inability of prediction and are based on the tradi-
tional time series representation while the results shown in
Figure 5 suggest the prediction capability of our approach
and are based on event-based representation.
Note that the results obtained with J48 are a slight im-
provement over those obtained with SVM. SVM models
data by using a smooth function of explanatory variables.
Although the training method for parameters of the func-
tion is different, traditional methods of time series analysis
such as ARIMA also models data by applying a smooth
function. However, J48 achieved better results using a to-
tally different framework, i.e., a classification tree. These
results indicate the possible inappropriateness of traditional
time series analyzing methods (i.e., the use of fixed inter-
val time series representation and smooth functions) for
the analysis of HFT. See Chapter 5 for further discussion.
4·3 Improvement of accuracy
Because the prediction accuracy is important for actual
stock trading, we have attempted to improve this accuracy
and the results are reported in this chapter. The promising
results we achieved by using event-based representation
and J48, prompted us to use these two methods as the base
framework, to aim to improve the prediction accuracy with
additional means.
Figure 6 shows the classification/prediction accuracy of
J48 using both historical data of the quoted price e14 and
order book information e1 , e2 , ..., e13 . The accuracy that
was achieved when event-based representations 1 and 2
(“With1” and “With2” in the figure) were used with e14 .
On the other hand, “Without1” and “Without2” show the
accuracy without the use of e14 . From this, we concluded
that the use of historical data together with order book in-
formation leads to a slight improvement of accuracy com-
pared to when the order book information is excluded.
The improved accuracy we achieved with event-based
representation 2, led us to perform additional experiments
to determine the prediction accuracy of J48 model, which
is trained with event-based representation 2, but is tested
人工知能学会論文誌 30 巻 5 号 F（2015 年）
Without1 61.9%
Without2 79.2%
With1 62.9%
With2 81.1%
0 20 40 60
Accuracy (%)
80 100
Fig. 6 Improvement of accuracy by using historical data
Rep.1 62.9%
Training 66.5%
Rep.2 81.1%
0 20 40 60 80 100
Accuracy (%)
Fig. 7 Representation 2 is used for training while Representation 1 is
used for test
on the test set from event-based representation 1. With
this setting, the target label is the quoted price change di-
rection that is realized by the training data. This means
that the output is just a classification and not a prediction.
However, when the model is applied to the test data with
event-based representation 1, because the input, i.e., an
order, will not necessarily be a fulfilled order, the output
label could be interpreted as a prediction of the direction
of the next quoted price change. Based on this interpreta-
tion, we could use the model in real trading and calculate
the expected prediction accuracy for the situation.
The prediction accuracy of a model trained with event-
based representation 2 and tested with event-based repre-
sentation 1 is 66.5% as shown in Figure 7 next to the label
“Training.” This value is in between the values of event-
based representations 1 (Rep.1 in the figure) and 2 (Rep.2
in the figure, Figure 7 Rep.1: 62.9% and Rep.2: 81.1%
respectively∗1 ). Although we have not yet identified the
cause of this improvement (i.e., the difference in accuracy
between “Rep.1” and “Training”), this phenomenon is in-
teresting, and requires further study.
The last experiment we conducted as part of this study
was to examine the number of data sets that would be re-
quired for training. During the experiments, we noticed
fluctuations in the prediction accuracy. Figure 8 shows the
distribution of the prediction accuracy for a single stock.
∗1 Figure 7 Rep.1 shows the same value that was shown in Figure 6
(With1) for comparison purposes.
Short-term Stock Price Analysis Based on Order Book Information 689

100 100

90 90
Classification Accuracy (%)

Classification Accuracy (%)

80 80

70 70

60 60

50 50

40 40
0 1000 2000 3000 4000 5000 6000 7000 8000 0 200 400 600 800 1000 1200
Traning Data ID Traning Data ID

Fig. 8 Distribution of prediction accuracy using 10,000 orders for Fig. 10 Distribution of classification accuracy using five day training
training and 1,000 orders for testing data

R1.10k 66.5% All 67.7%

R2.10k 81.1% 60.2%

e_1,e_14

R1.Day 67.7%
e_4,e_14 62.2%
R2.Day 82.9%
e_7,e_14 61.7%

0 20 40 60 80 100
Accuracy (%)
e_10,e_14 59.9%

e_13,e_14 67.7%
Fig. 9 Effect of the size of the training data set

0 20 40 60 80 100
Accuracy (%)
The number of orders for this stock between Jan. 2010
and May 2014 was approximately 77,000,000, and we ex-
Fig. 11 Prediction accuracy with different attributes
tracted 7,700 training sets, each of which consisted of 10,000
orders. Using the subsequent 1,000 orders of this stock,
we calculated the prediction accuracy. Figure 8 plots each 5. Discussion
accuracy and the results vary greatly as can be seen in the
figure. As we suspected this variation to be caused by the Figure 11 compares the prediction accuracy of the mod-
use of a training set of insufficient size, we performed the els trained with one of the attributes e1 , e4 , e7 , e10 , e13 and
same experiment again after increasing its size. e14 . These results compare the explanatory power of order
Figure 9 shows the results of experiments with a larger book information. As shown in Figure 11, the most infor-
size training set. In this experiment, five days of order his- mative attribute is e13 other than e14 . Figure 12 shows an
tories were used as the training data set, and orders placed example of the learned rule during the experiments with
on the next single day were used for the test data set ∗2 . As attributes e13 and e14 . As shown in Figure 12, e13 (i.e.,
shown in Figure 9, the classification accuracy with event- the number of asks and bids with the most recent quoted
based representation 1 increased from 81.1% to 82.9%, price) is sufficient to classify the future stock price change
whereas the prediction accuracy with event-based repre- direction with accuracy 82.9%.
sentation 2 increased from 66.5% to 67.7% and the distri- It is difficult to understand why this simple rule was not
bution of accuracy becomes narrower (See Figure 10). reported before. However, as far as the short-term pre-
diction of HFT is concerned, it is clear that stock returns
∗2 The size of the training/test data sets differed in terms of the do not show a random walk. The institutional investors
stocks and date of trades. The average size of the training/test data
sets for the data shown in Figure 9 were approximately 60,000 and
who have direct access to the trading system may have
6,000 respectively. an unfair advantage over individual investors who do not
690 人工知能学会論文誌 30 巻 5 号 F（2015 年）

J48 pruned tree

------------------

e14 <= -1
| e13 <= -1: n (111.0/24.0)
| e13 > -1: p (878.0/166.0)
e14 > -1
| e13 <= 0: n (845.0/135.0)
| e13 > 0: p (125.0/26.0)
Number of Leaves : 4 68
Size of the tree : 7

Change in Prediction Accuracy (%)

Time taken to build model: 0.14 seconds
Time taken to test model on training data: 0.11 seconds 67.8
=== Error on training data ===
Correctly Classified Instances 1608 82.0827 %
Incorrectly Classified Instances 351 17.9173 % 67.6
Kappa statistic 0.6417
Mean absolute error 0.1956
Root mean squared error 0.3128
Relative absolute error 58.6688 % 67.4
Root relative squared error 76.615 %
Coverage of cases (0.95 level) 100 %
Mean rel. region size (0.95 level) 66.6667 %
Total Number of Instances 1959 67.2
=== Error on test data ===
Correctly Classified Instances 942 81.9843 %
Incorrectly Classified Instances 207 18.0157 % 67
Kappa statistic 0.6393 0 5 10 15 20
Mean absolute error 0.1978 Days
Root mean squared error 0.3145
Relative absolute error 59.3132 %
Root relative squared error 77.014 % Fig. 13 Stability of the learned rule
Coverage of cases (0.95 level) 100 %
Mean rel. region size (0.95 level) 66.6667 %
Total Number of Instances 1149

Fig. 12 An example of learned rules

have such high speed access. Although we did not investi-

gate this phenomenon in other HFT markets, such as retail
foreign exchange trading, the simplicity of the found rule
suggests the generality of our finding. However, this issue
would have to be investigated in future.
Figure 13 shows another possibility of unfairness. We
conducted an experiment on the prediction accuracy of
learned rules. The prediction accuracy of the learned rule
decreases day by day. However, as Figure 13 shows, the
speed of degradation is slow. This stability of the learned
rule facilitates implementation of the system, because in-
vestors who wish to use the trading system with the found
rule can replace the rules every weekend, as J48 requires (1)
less than an hour of learning time. Investors can update
the system during weekends.
The last topics we have to discuss in this study are the
comparison of J48 and SVM. We have conducted various
experiments in which J48 tends to outperform SVM. How-
ever, the simplicity of the hidden rule behind the stock
price changes, as shown in Figure 12, does not explain the
inability of SVM to perform better than J48.
(2) (3)
Figure 14 shows examples of the decision boundary found
by J48 and SVM. As shown in Figure 14, the boundaries Fig. 14 Boundary of J48 and SVM
of SVM and that of J48 appear similar. The capability
of using tilted boundaries (See Figure 14 (2)) or smooth
nonlinear boundaries (Figure 14 (3))) would suggest that
SVM has an advantage. However, the results suggest that
the opposite is true.
Short-term Stock Price Analysis Based on Order Book Information
Our assumption for the reason for this phenomenon is
the difference between the penalty functions that J48 and
SVM use for learning. The soft-margin formulation of
SVM uses the distance |t − (wT φ(x) + b)| as the penalty
for each miss-classified data. The penalty used by J48
is simpler, i.e., entropy or information gain. The eval-
uation measure for our experiments, i.e., the classifica-
tion/prediction accuracy is the ratio of the number of sam-
ples that are correctly classified/predicted versus those that
are not. The ratio is not dependent on how far from the
boundary the miss-classified samples reside. Therefore,
the penalty function used by J48 seems to be more ade-
quate than that of SVM to express the errors for the pre-
diction in the change of the stock price. Because a similar
distance, such as (t − (wT φ(x) + b))2 , is used in most AR
models and their descendants, they may suffer from a sim-
ilar problem.
6. Conclusion
In this study, we analyzed order book information of
the TSE (Tokyo Stock Exchange, the third largest stock
exchange in the world) from Jan. 2010 to May 2014,
and showed that a simple rule is capable of classifying
the change in direction of short-term stock prices with an
82.9% accuracy and of predicting it with an accuracy of
67.7% by using the order book information of HFT (High-
Frequency Trading).
As the volume of HFT, which forms short-term stock
exchanges, is increasing dramatically, our study suggests
the importance of short-time market analyses that are not
well studied in conventional financial market theories.
The experimental results also suggest the importance of
new data representation, i.e., event-based representation,
and the analysis methods that are not well studied in con-
ventional financial studies. The use of the penalty func-
tion to determine optimal model parameters is important
to identify the model with optimal performance.
Although the prediction accuracy is less than the clas-
sification accuracy, it is still 67.7% and can be applied to
actual trading. This level of accuracy may suggest that in-
stitutional investors who can access the trading system di-
rectly have an unfair advantage over individual investors
who do not have such high-speed access.
Acknowledgments
This work was supported in part by JSPS KAKENHI
Grant Number 25280114 and 25330266.
691
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〔担当委員：和泉 潔〕

Received July 27, 2015.

Author’s Profile

Kenichi Yoshida (Member)

received the Ph.D. in engineering from Osaka University in
1992. In 1980, he joined Hitachi Ltd. Since 2002, he has
been a Professor at University of Tsukuba, Tokyo, Japan.
His current research interest includes application of Internet
and application of machine learning techniques.

Akito Sakurai (Member)

graduated from the University of Tokyo in 1975, completed
his master’s course in 1977, and joined Hitachi, Ltd. In 1978
he earned an M.S. degree in Computer Science at the Uni-
versity of Illinois. In 1989 he moved the Advanced Research
Laboratory, Hitachi, and in 1996 the Central Research Labo-
ratory. In 1998 he became a professor at the Japan Advanced
Institute of Science and Technology. He has been a profes-
sor at Keio University since 2002. He holds D.Eng. degree
(The University of Tokyo, 1993).