Forecasting stock prices remains a fundamental yet complex challenge in financial economics due to the nonlinearity, volatility, and exogenous shocks characterizing market behavior. This paper proposes a hybrid deep learning framework that integrates Long Short-Term Memory (LSTM) networks for time-series modeling with Transformer-based architectures for textual sentiment extraction from financial news. The goal is to enhance predictive accuracy by combining structured historical data with unstructured semantic signals. Using three years of daily data from Apple Inc. (AAPL), the model captures endogenous price dynamics via LSTM and incorporates contemporaneous market sentiment through FinBERT, a Transformer model pretrained on financial text. Empirical results show that the hybrid model outperforms price-only baselines across multiple evaluation metrics, including mean squared error (MSE) and directional accuracy. The incorporation of sentiment features proves particularly valuable around earnings announcements and event-driven volatility regimes. This study contributes to the literature on machine learning in finance by demonstrating the complementary strengths of multimodal learning, offering a more interpretable and robust framework for stock price prediction. The findings also open avenues for future research in real-time forecasting, reinforcement learning integration, and the application of hybrid models across diverse asset classes.
Vallarino, D. (2025). An AI-Enhanced Forecasting Framework: Integrating LSTM and Transformer-Based Sentiment for Stock Price Prediction. Journal of Economic Analysis, 4(3), 109. doi:10.58567/jea04030001
ACS Style
Vallarino, D. An AI-Enhanced Forecasting Framework: Integrating LSTM and Transformer-Based Sentiment for Stock Price Prediction. Journal of Economic Analysis, 2025, 4, 109. doi:10.58567/jea04030001
AMA Style
Vallarino D. An AI-Enhanced Forecasting Framework: Integrating LSTM and Transformer-Based Sentiment for Stock Price Prediction. Journal of Economic Analysis; 2025, 4(3):109. doi:10.58567/jea04030001
Chicago/Turabian Style
Vallarino, Diego 2025. "An AI-Enhanced Forecasting Framework: Integrating LSTM and Transformer-Based Sentiment for Stock Price Prediction" Journal of Economic Analysis 4, no.3:109. doi:10.58567/jea04030001
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ACS Style
Vallarino, D. An AI-Enhanced Forecasting Framework: Integrating LSTM and Transformer-Based Sentiment for Stock Price Prediction. Journal of Economic Analysis, 2025, 4, 109. doi:10.58567/jea04030001
AMA Style
Vallarino D. An AI-Enhanced Forecasting Framework: Integrating LSTM and Transformer-Based Sentiment for Stock Price Prediction. Journal of Economic Analysis; 2025, 4(3):109. doi:10.58567/jea04030001
Chicago/Turabian Style
Vallarino, Diego 2025. "An AI-Enhanced Forecasting Framework: Integrating LSTM and Transformer-Based Sentiment for Stock Price Prediction" Journal of Economic Analysis 4, no.3:109. doi:10.58567/jea04030001
APA style
Vallarino, D. (2025). An AI-Enhanced Forecasting Framework: Integrating LSTM and Transformer-Based Sentiment for Stock Price Prediction. Journal of Economic Analysis, 4(3), 109. doi:10.58567/jea04030001
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References
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