This study aims to predict the direction of stock prices by integrating time-varying effective transfer entropy (ETE) and various machine learning algorithms. At first, we explore that the ETE based on 3 and 6 months moving windows can be regarded as the market explanatory variable by analyzing the association between the financial crises and Granger-causal relationships among the stocks. We evaluate SELECTIVE INS GROUP prediction models with Modular Neural Network (Market Direction Analysis) and Ridge Regression1,2,3,4 and conclude that the SIGI stock is predictable in the short/long term. According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Sell SIGI stock.

Keywords: SIGI, SELECTIVE INS GROUP, 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

## SIGI Target Price Prediction Modeling Methodology

Stock market is considered chaotic, complex, volatile and dynamic. Undoubtedly, its prediction is one of the most challenging tasks in time series forecasting. Moreover existing Artificial Neural Network (ANN) approaches fail to provide encouraging results. Meanwhile advances in machine learning have presented favourable results for speech recognition, image classification and language processing. We consider SELECTIVE INS GROUP Stock Decision Process with Ridge Regression where A is the set of discrete actions of SIGI 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(Ridge Regression)5,6,7= $\begin{array}{cccc}{p}_{a1}& {p}_{a2}& \dots & {p}_{1n}\\ & ⋮\\ {p}_{j1}& {p}_{j2}& \dots & {p}_{jn}\\ & ⋮\\ {p}_{k1}& {p}_{k2}& \dots & {p}_{kn}\\ & ⋮\\ {p}_{n1}& {p}_{n2}& \dots & {p}_{nn}\end{array}$ X R(Modular Neural Network (Market Direction Analysis)) X S(n):→ (n+6 month) $\begin{array}{l}\int {e}^{x}\mathrm{rx}\end{array}$

n:Time series to forecast

p:Price signals of SIGI 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?

## SIGI Stock Forecast (Buy or Sell) for (n+6 month)

Sample Set: Neural Network
Stock/Index: SIGI SELECTIVE INS GROUP
Time series to forecast n: 23 Sep 2022 for (n+6 month)

According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Sell SIGI 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

SELECTIVE INS GROUP assigned short-term B3 & long-term Ba3 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Market Direction Analysis) with Ridge Regression1,2,3,4 and conclude that the SIGI stock is predictable in the short/long term. According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Sell SIGI stock.

### Financial State Forecast for SIGI Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B3Ba3
Operational Risk 3178
Market Risk7489
Technical Analysis5550
Fundamental Analysis5956
Risk Unsystematic3349

### Prediction Confidence Score

Trust metric by Neural Network: 83 out of 100 with 504 signals.

## References

1. S. J. Russell and P. Norvig. Artificial Intelligence: A Modern Approach. Prentice Hall, Englewood Cliffs, NJ, 3nd edition, 2010
2. Athey S, Bayati M, Doudchenko N, Imbens G, Khosravi K. 2017a. Matrix completion methods for causal panel data models. arXiv:1710.10251 [math.ST]
3. Christou, C., P. A. V. B. Swamy G. S. Tavlas (1996), "Modelling optimal strategies for the allocation of wealth in multicurrency investments," International Journal of Forecasting, 12, 483–493.
4. V. Borkar. A sensitivity formula for the risk-sensitive cost and the actor-critic algorithm. Systems & Control Letters, 44:339–346, 2001
5. Lai TL, Robbins H. 1985. Asymptotically efficient adaptive allocation rules. Adv. Appl. Math. 6:4–22
6. Thomas P, Brunskill E. 2016. Data-efficient off-policy policy evaluation for reinforcement learning. In Pro- ceedings of the International Conference on Machine Learning, pp. 2139–48. La Jolla, CA: Int. Mach. Learn. Soc.
7. Friedman JH. 2002. Stochastic gradient boosting. Comput. Stat. Data Anal. 38:367–78
Frequently Asked QuestionsQ: What is the prediction methodology for SIGI stock?
A: SIGI stock prediction methodology: We evaluate the prediction models Modular Neural Network (Market Direction Analysis) and Ridge Regression
Q: Is SIGI stock a buy or sell?
A: The dominant strategy among neural network is to Sell SIGI Stock.
Q: Is SELECTIVE INS GROUP stock a good investment?
A: The consensus rating for SELECTIVE INS GROUP is Sell and assigned short-term B3 & long-term Ba3 forecasted stock rating.
Q: What is the consensus rating of SIGI stock?
A: The consensus rating for SIGI is Sell.
Q: What is the prediction period for SIGI stock?
A: The prediction period for SIGI is (n+6 month)

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