Can neural networks predict stock market? (UNP Stock Forecast)

In the finance world stock trading is one of the most important activities. Stock market prediction is an act of trying to determine the future value of a stock other financial instrument traded on a financial exchange. This paper explains the prediction of a stock using Machine Learning. The technical and fundamental or the time series analysis is used by the most of the stockbrokers while making the stock predictions. We evaluate Union Pacific Corporation prediction models with Modular Neural Network (Market Direction Analysis) and Wilcoxon Sign-Rank Test^1,2,3,4 and conclude that the UNP stock is predictable in the short/long term. According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Hold UNP stock.

Keywords: UNP, Union Pacific Corporation, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

1. What are main components of Markov decision process?
2. Nash Equilibria
3. Understanding Buy, Sell, and Hold Ratings

UNP Target Price Prediction Modeling Methodology

Predictions on stock market prices are a great challenge due to the fact that it is an immensely complex, chaotic and dynamic environment. There are many studies from various areas aiming to take on that challenge and Machine Learning approaches have been the focus of many of them. There are many examples of Machine Learning algorithms been able to reach satisfactory results when doing that type of prediction. This article studies the usage of LSTM networks on that scenario, to predict future trends of stock prices based on the price history, alongside with technical analysis indicators. We consider Union Pacific Corporation Stock Decision Process with Wilcoxon Sign-Rank Test where A is the set of discrete actions of UNP stock holders, F is the set of discrete states, P : S × F × S → R is the transition probability distribution, R : S × F → R is the reaction function, and γ ∈ [0, 1] is a move factor for expectation.^1,2,3,4

F(Wilcoxon Sign-Rank Test)^5,6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Modular Neural Network (Market Direction Analysis)) X S(n):→ (n+1 year) $R=\left(\begin{array}{ccc}1& 0& 0\\ 0& 1& 0\\ 0& 0& 1\end{array}\right)$

n:Time series to forecast

p:Price signals of UNP stock

j:Nash equilibria

k:Dominated move

a:Best response for target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do AC Investment Research machine learning (predictive) algorithms actually work?

UNP Stock Forecast (Buy or Sell) for (n+1 year)

Sample Set: Neural Network
Stock/Index: UNP Union Pacific Corporation
Time series to forecast n: 16 Sep 2022 for (n+1 year)

According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Hold UNP stock.

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Yellow to Green): *Technical Analysis%

Conclusions

Union Pacific Corporation assigned short-term Ba3 & long-term B1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Market Direction Analysis) with Wilcoxon Sign-Rank Test^1,2,3,4 and conclude that the UNP stock is predictable in the short/long term. According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Hold UNP stock.

Financial State Forecast for UNP Stock Options & Futures

Rating	Short-Term	Long-Term Senior
Outlook*	Ba3	B1
Operational Risk	35	41
Market Risk	58	56
Technical Analysis	67	30
Fundamental Analysis	72	79
Risk Unsystematic	82	81

Prediction Confidence Score

Trust metric by Neural Network: 90 out of 100 with 519 signals.

References

1. Arora S, Li Y, Liang Y, Ma T. 2016. RAND-WALK: a latent variable model approach to word embeddings. Trans. Assoc. Comput. Linguist. 4:385–99
2. H. Kushner and G. Yin. Stochastic approximation algorithms and applications. Springer, 1997.
3. Mnih A, Kavukcuoglu K. 2013. Learning word embeddings efficiently with noise-contrastive estimation. In Advances in Neural Information Processing Systems, Vol. 26, ed. Z Ghahramani, M Welling, C Cortes, ND Lawrence, KQ Weinberger, pp. 2265–73. San Diego, CA: Neural Inf. Process. Syst. Found.
4. Alexander, J. C. Jr. (1995), "Refining the degree of earnings surprise: A comparison of statistical and analysts' forecasts," Financial Review, 30, 469–506.
5. Bell RM, Koren Y. 2007. Lessons from the Netflix prize challenge. ACM SIGKDD Explor. Newsl. 9:75–79
6. D. White. Mean, variance, and probabilistic criteria in finite Markov decision processes: A review. Journal of Optimization Theory and Applications, 56(1):1–29, 1988.
7. Bennett J, Lanning S. 2007. The Netflix prize. In Proceedings of KDD Cup and Workshop 2007, p. 35. New York: ACM

Frequently Asked Questions

Q: What is the prediction methodology for UNP stock?
A: UNP stock prediction methodology: We evaluate the prediction models Modular Neural Network (Market Direction Analysis) and Wilcoxon Sign-Rank Test
Q: Is UNP stock a buy or sell?
A: The dominant strategy among neural network is to Hold UNP Stock.
Q: Is Union Pacific Corporation stock a good investment?
A: The consensus rating for Union Pacific Corporation is Hold and assigned short-term Ba3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of UNP stock?
A: The consensus rating for UNP is Hold.
Q: What is the prediction period for UNP stock?
A: The prediction period for UNP is (n+1 year)

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