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The primary objective of this study is to investigate whether the inclusion of convertible bond prices as important inputs into artificial neural networks can lead to improved accuracy in predicting Chinese stock prices. This novel approach aims to uncover the latent potential inherent in convertible bond dynamics, ultimately resulting in enhanced precision when forecasting stock prices.

The authors employed two machine learning models, namely the backpropagation neural network (BPNN) model and the extreme learning machine neural networks (ELMNN) model, on empirical Chinese financial time series data.

The results showed that the convertible bond price had a strong predictive power for low-market-value stocks but not for high-market-value stocks. The BPNN algorithm performed better than the ELMNN algorithm in predicting stock prices using the convertible bond price as an input indicator for low-market-value stocks. In contrast, ELMNN showed a significant decrease in prediction accuracy when the convertible bond price was added.

This study represents the initial endeavor to integrate convertible bond data into both the BPNN model and the ELMNN model for the purpose of predicting Chinese stock prices.