Modelling A.I. in Economics

Can stock prices be predicted? (IP Stock Forecast) (Forecast)

One decision in Stock Market can make huge impact on an investor's life. The stock market is a complex system and often covered in mystery, it is therefore, very difficult to analyze all the impacting factors before making a decision. In this research, we have tried to design a stock market prediction model which is based on different factors. We evaluate International Paper prediction models with Modular Neural Network (DNN Layer) and Statistical Hypothesis Testing1,2,3,4 and conclude that the IP stock is predictable in the short/long term. According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Sell IP stock.


Keywords: IP, International Paper, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. What is the best way to predict stock prices?
  2. What is Markov decision process in reinforcement learning?
  3. Trading Interaction

IP Target Price Prediction Modeling Methodology

Three networks are compared for low false alarm stock trend predictions. Short-term trends, particularly attractive for neural network analysis, can be used profitably in scenarios such as option trading, but only with significant risk. Therefore, we focus on limiting false alarms, which improves the risk/reward ratio by preventing losses. To predict stock trends, we exploit time delay, recurrent, and probabilistic neural networks (TDNN, RNN, and PNN, respectively), utilizing conjugate gradient and multistream extended Kalman filter training for TDNN and RNN. We consider International Paper Stock Decision Process with Statistical Hypothesis Testing where A is the set of discrete actions of IP 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(Statistical Hypothesis Testing)5,6,7= p a 1 p a 2 p 1 n p j 1 p j 2 p j n p k 1 p k 2 p k n p n 1 p n 2 p n n X R(Modular Neural Network (DNN Layer)) X S(n):→ (n+8 weeks) r s rs

n:Time series to forecast

p:Price signals of IP 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?

IP Stock Forecast (Buy or Sell) for (n+8 weeks)

Sample Set: Neural Network
Stock/Index: IP International Paper
Time series to forecast n: 01 Nov 2022 for (n+8 weeks)

According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Sell IP 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%

Adjusted IFRS* Prediction Methods for International Paper

  1. For the purposes of the transition provisions in paragraphs 7.2.1, 7.2.3–7.2.28 and 7.3.2, the date of initial application is the date when an entity first applies those requirements of this Standard and must be the beginning of a reporting period after the issue of this Standard. Depending on the entity's chosen approach to applying IFRS 9, the transition can involve one or more than one date of initial application for different requirements.
  2. Expected credit losses reflect an entity's own expectations of credit losses. However, when considering all reasonable and supportable information that is available without undue cost or effort in estimating expected credit losses, an entity should also consider observable market information about the credit risk of the particular financial instrument or similar financial instruments.
  3. When measuring the fair values of the part that continues to be recognised and the part that is derecognised for the purposes of applying paragraph 3.2.13, an entity applies the fair value measurement requirements in IFRS 13 Fair Value Measurement in addition to paragraph 3.2.14.
  4. If items are hedged together as a group in a cash flow hedge, they might affect different line items in the statement of profit or loss and other comprehensive income. The presentation of hedging gains or losses in that statement depends on the group of items

*International Financial Reporting Standards (IFRS) are a set of accounting rules for the financial statements of public companies that are intended to make them consistent, transparent, and easily comparable around the world.

Conclusions

International Paper assigned short-term B1 & long-term Ba1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (DNN Layer) with Statistical Hypothesis Testing1,2,3,4 and conclude that the IP stock is predictable in the short/long term. According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Sell IP stock.

Financial State Forecast for IP International Paper Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B1Ba1
Operational Risk 5951
Market Risk4675
Technical Analysis8385
Fundamental Analysis3171
Risk Unsystematic8874

Prediction Confidence Score

Trust metric by Neural Network: 89 out of 100 with 777 signals.

References

  1. Tibshirani R. 1996. Regression shrinkage and selection via the lasso. J. R. Stat. Soc. B 58:267–88
  2. R. Williams. Simple statistical gradient-following algorithms for connectionist reinforcement learning. Ma- chine learning, 8(3-4):229–256, 1992
  3. Bottou L. 2012. Stochastic gradient descent tricks. In Neural Networks: Tricks of the Trade, ed. G Montavon, G Orr, K-R Müller, pp. 421–36. Berlin: Springer
  4. Canova, F. B. E. Hansen (1995), "Are seasonal patterns constant over time? A test for seasonal stability," Journal of Business and Economic Statistics, 13, 237–252.
  5. Dimakopoulou M, Zhou Z, Athey S, Imbens G. 2018. Balanced linear contextual bandits. arXiv:1812.06227 [cs.LG]
  6. Brailsford, T.J. R.W. Faff (1996), "An evaluation of volatility forecasting techniques," Journal of Banking Finance, 20, 419–438.
  7. Jiang N, Li L. 2016. Doubly robust off-policy value evaluation for reinforcement learning. In Proceedings of the 33rd International Conference on Machine Learning, pp. 652–61. La Jolla, CA: Int. Mach. Learn. Soc.
Frequently Asked QuestionsQ: What is the prediction methodology for IP stock?
A: IP stock prediction methodology: We evaluate the prediction models Modular Neural Network (DNN Layer) and Statistical Hypothesis Testing
Q: Is IP stock a buy or sell?
A: The dominant strategy among neural network is to Sell IP Stock.
Q: Is International Paper stock a good investment?
A: The consensus rating for International Paper is Sell and assigned short-term B1 & long-term Ba1 forecasted stock rating.
Q: What is the consensus rating of IP stock?
A: The consensus rating for IP is Sell.
Q: What is the prediction period for IP stock?
A: The prediction period for IP is (n+8 weeks)

Premium

  • Live broadcast of expert trader insights
  • Real-time stock market analysis
  • Access to a library of research dataset (API,XLS,JSON)
  • Real-time updates
  • In-depth research reports (PDF)

Login
This project is licensed under the license; additional terms may apply.