Modeling and Forecasting LQ45 Stock Index Dynamics with a Hidden Markov Model
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Investing has become increasingly popular with the advancement of digital technology. A thriving stock market, reflecting strong investor confidence and capital formation, often serves as a leading indicator of robust economic growth. One of the main indicators used in evaluating the performance of the Indonesian stock market is the LQ45 index on the Indonesia Stock Exchange (IDX). The objective of this research is to determine the predictive capability of the LQ45 stock index in identifying buying and selling opportunities. This research employs the hidden Markov model method, which has the ability to capture unobservable observations and predict the uncertainty that occurs. The research, which utilized training data in 2023, made predictions for the first quarter of 2024. The results of the model were evaluated using a paired t-test with a significance value of 5%, obtaining a p-value of 0.51747 for the Open index, 0.28551 for Close, and not significant for High and Low. These values indicate that there is no difference between actual data and predicted data on Open and Close data. Applying a Hidden Markov Model (HMM) to LQ45 stock analysis offers a significant improvement over traditional Markov Chain methods by accounting for the unobservable factors that influence stock prices.
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