How Is Machine Learning Used in Trading? (S&P/BMV IPC Index Stock Forecast)

This paper addresses problem of predicting direction of movement of stock and stock price index. The study compares four prediction models, Artificial Neural Network (ANN), Support Vector Machine (SVM), random forest and naive-Bayes with two approaches for input to these models. We evaluate S&P/BMV IPC Index prediction models with Modular Neural Network (Financial Sentiment Analysis) and Independent T-Test^1,2,3,4 and conclude that the S&P/BMV IPC Index stock is predictable in the short/long term. According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Sell S&P/BMV IPC Index stock.

Keywords: S&P/BMV IPC Index, S&P/BMV IPC Index, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

1. What are the most successful trading algorithms?
2. What is a prediction confidence?
3. Is it better to buy and sell or hold?

S&P/BMV IPC Index 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 S&P/BMV IPC Index Stock Decision Process with Independent T-Test where A is the set of discrete actions of S&P/BMV IPC Index 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(Independent T-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 (Financial Sentiment Analysis)) X S(n):→ (n+4 weeks) $R=\left(\begin{array}{ccc}1& 0& 0\\ 0& 1& 0\\ 0& 0& 1\end{array}\right)$

n:Time series to forecast

p:Price signals of S&P/BMV IPC Index 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?

S&P/BMV IPC Index Stock Forecast (Buy or Sell) for (n+4 weeks)

Sample Set: Neural Network
Stock/Index: S&P/BMV IPC Index S&P/BMV IPC Index
Time series to forecast n: 12 Sep 2022 for (n+4 weeks)

According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Sell S&P/BMV IPC Index 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

S&P/BMV IPC Index assigned short-term Baa2 & long-term B1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Financial Sentiment Analysis) with Independent T-Test^1,2,3,4 and conclude that the S&P/BMV IPC Index stock is predictable in the short/long term. According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Sell S&P/BMV IPC Index stock.

Financial State Forecast for S&P/BMV IPC Index Stock Options & Futures

Rating	Short-Term	Long-Term Senior
Outlook*	Baa2	B1
Operational Risk	86	71
Market Risk	75	74
Technical Analysis	38	35
Fundamental Analysis	81	71
Risk Unsystematic	82	47

Prediction Confidence Score

Trust metric by Neural Network: 80 out of 100 with 606 signals.

References

1. Clements, M. P. D. F. Hendry (1997), "An empirical study of seasonal unit roots in forecasting," International Journal of Forecasting, 13, 341–355.
2. J. Spall. Multivariate stochastic approximation using a simultaneous perturbation gradient approximation. IEEE Transactions on Automatic Control, 37(3):332–341, 1992.
3. Breiman L, Friedman J, Stone CJ, Olshen RA. 1984. Classification and Regression Trees. Boca Raton, FL: CRC Press
4. Schapire RE, Freund Y. 2012. Boosting: Foundations and Algorithms. Cambridge, MA: MIT Press
5. M. Colby, T. Duchow-Pressley, J. J. Chung, and K. Tumer. Local approximation of difference evaluation functions. In Proceedings of the Fifteenth International Joint Conference on Autonomous Agents and Multiagent Systems, Singapore, May 2016
6. Blei DM, Lafferty JD. 2009. Topic models. In Text Mining: Classification, Clustering, and Applications, ed. A Srivastava, M Sahami, pp. 101–24. Boca Raton, FL: CRC Press
7. Chernozhukov V, Escanciano JC, Ichimura H, Newey WK. 2016b. Locally robust semiparametric estimation. arXiv:1608.00033 [math.ST]

Frequently Asked Questions

Q: What is the prediction methodology for S&P/BMV IPC Index stock?
A: S&P/BMV IPC Index stock prediction methodology: We evaluate the prediction models Modular Neural Network (Financial Sentiment Analysis) and Independent T-Test
Q: Is S&P/BMV IPC Index stock a buy or sell?
A: The dominant strategy among neural network is to Sell S&P/BMV IPC Index Stock.
Q: Is S&P/BMV IPC Index stock a good investment?
A: The consensus rating for S&P/BMV IPC Index is Sell and assigned short-term Baa2 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of S&P/BMV IPC Index stock?
A: The consensus rating for S&P/BMV IPC Index is Sell.
Q: What is the prediction period for S&P/BMV IPC Index stock?
A: The prediction period for S&P/BMV IPC Index is (n+4 weeks)

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