(Re-)Imag(in)ing Price Trends

80 Pages Posted: 4 Jan 2021 Last revised: 23 Oct 2022

See all articles by Jingwen Jiang

Jingwen Jiang

University of Chicago

Bryan T. Kelly

Yale SOM; AQR Capital Management, LLC; National Bureau of Economic Research (NBER)

Dacheng Xiu

University of Chicago - Booth School of Business

Date Written: December 1, 2020


We reconsider the idea of trend-based predictability using methods that flexibly learn price patterns that are most predictive of future returns, rather than testing hypothesized or pre-specified patterns (e.g., momentum and reversal). Our raw predictor data are images---stock-level price charts---from which we elicit the price patterns that best predict returns using machine learning image analysis methods. The predictive patterns we identify are largely distinct from trend signals commonly analyzed in the literature, give more accurate return predictions, translate into more profitable investment strategies, and are robust to a battery of specification variations. They also appear context-independent: Predictive patterns estimated at short time scales (e.g., daily data) give similarly strong predictions when applied at longer time scales (e.g., monthly), and patterns learned from US stocks predict equally well in international markets.

Keywords: convolutional neural network (CNN), image classification, transfer learning, machine learning, technical analysis, return prediction

JEL Classification: G10, G11, G12, G14, G15

Suggested Citation

Jiang, Jingwen and Kelly, Bryan T. and Xiu, Dacheng, (Re-)Imag(in)ing Price Trends (December 1, 2020). Chicago Booth Research Paper No. 21-01, Available at SSRN: https://ssrn.com/abstract=3756587 or http://dx.doi.org/10.2139/ssrn.3756587

Jingwen Jiang

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Bryan T. Kelly (Contact Author)

Yale SOM ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dacheng Xiu

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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