Machine Learning-Driven Sri Lankan Stock Market Prediction: Harnessing Economic Indicators and Sentiment Analysis

The stock market plays a pivotal role in a nation's economy. People tend to invest in the stock market due to its high rate of return. However, predicting the stock market remains a formidable challenge. This research uses machine learning algorithms to predict the ASPI and S&P 20 monthly stock market indexes by considering global economic conditions, macroeconomic variables, and sentiment data. Correlation tests, forward stepwise regression, and p-value tests were carried out to identify the influential variables. Machine learning algorithms including deep learning were utilized for model building, using the influential variables dataset. Shuffling and non-shuffling methods were deployed during dataset splitting. Additionally, included the previous month's stock value to the influential variables dataset and re-conducted the model building to assess the performance. The best-performing model (with the lowest MAE rate) was selected separately for ASPI and S&P 20 prediction.