Modelling A.I. in Economics

How do you decide buy or sell a stock? (Euro Stoxx 50 Index Stock Forecast) (Forecast)

Recently, a lot of interesting work has been done in the area of applying Machine Learning Algorithms for analyzing price patterns and predicting stock prices and index changes. Most stock traders nowadays depend on Intelligent Trading Systems which help them in predicting prices based on various situations and conditions, thereby helping them in making instantaneous investment decisions. We evaluate Euro Stoxx 50 Index prediction models with Modular Neural Network (Social Media Sentiment Analysis) and Spearman Correlation1,2,3,4 and conclude that the Euro Stoxx 50 Index 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 Sell Euro Stoxx 50 Index stock.


Keywords: Euro Stoxx 50 Index, Euro Stoxx 50 Index, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. Can stock prices be predicted?
  2. How do predictive algorithms actually work?
  3. Which neural network is best for prediction?

Euro Stoxx 50 Index Target Price Prediction Modeling Methodology

Finance is one of the pioneering industries that started using Machine Learning (ML), a subset of Artificial Intelligence (AI) in the early 80s for market prediction. Since then, major firms and hedge funds have adopted machine learning for stock prediction, portfolio optimization, credit lending, stock betting, etc. In this paper, we survey all the different approaches of machine learning that can be incorporated in applied finance. We consider Euro Stoxx 50 Index Stock Decision Process with Spearman Correlation where A is the set of discrete actions of Euro Stoxx 50 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(Spearman Correlation)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 (Social Media Sentiment Analysis)) X S(n):→ (n+1 year) i = 1 n s i

n:Time series to forecast

p:Price signals of Euro Stoxx 50 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?

Euro Stoxx 50 Index Stock Forecast (Buy or Sell) for (n+1 year)

Sample Set: Neural Network
Stock/Index: Euro Stoxx 50 Index Euro Stoxx 50 Index
Time series to forecast n: 28 Oct 2022 for (n+1 year)

According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Sell Euro Stoxx 50 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%

Adjusted IFRS* Prediction Methods for Euro Stoxx 50 Index

  1. An entity's business model refers to how an entity manages its financial assets in order to generate cash flows. That is, the entity's business model determines whether cash flows will result from collecting contractual cash flows, selling financial assets or both. Consequently, this assessment is not performed on the basis of scenarios that the entity does not reasonably expect to occur, such as so-called 'worst case' or 'stress case' scenarios. For example, if an entity expects that it will sell a particular portfolio of financial assets only in a stress case scenario, that scenario would not affect the entity's assessment of the business model for those assets if the entity reasonably expects that such a scenario will not occur. If cash flows are realised in a way that is different from the entity's expectations at the date that the entity assessed the business model (for example, if the entity sells more or fewer financial assets than it expected when it classified the assets), that does not give rise to a prior period error in the entity's financial statements (see IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors) nor does it change the classification of the remaining financial assets held in that business model (ie those assets that the entity recognised in prior periods and still holds) as long as the entity considered all relevant information that was available at the time that it made the business model assessment.
  2. For the purpose of applying the requirements in paragraphs 6.4.1(c)(i) and B6.4.4–B6.4.6, an entity shall assume that the interest rate benchmark on which the hedged cash flows and/or the hedged risk (contractually or noncontractually specified) are based, or the interest rate benchmark on which the cash flows of the hedging instrument are based, is not altered as a result of interest rate benchmark reform.
  3. An entity can also designate only changes in the cash flows or fair value of a hedged item above or below a specified price or other variable (a 'one-sided risk'). The intrinsic value of a purchased option hedging instrument (assuming that it has the same principal terms as the designated risk), but not its time value, reflects a one-sided risk in a hedged item. For example, an entity can designate the variability of future cash flow outcomes resulting from a price increase of a forecast commodity purchase. In such a situation, the entity designates only cash flow losses that result from an increase in the price above the specified level. The hedged risk does not include the time value of a purchased option, because the time value is not a component of the forecast transaction that affects profit or loss.
  4. Subject to the conditions in paragraphs 4.1.5 and 4.2.2, this Standard allows an entity to designate a financial asset, a financial liability, or a group of financial instruments (financial assets, financial liabilities or both) as at fair value through profit or loss provided that doing so results in more relevant information.

*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

Euro Stoxx 50 Index assigned short-term B1 & long-term Ba2 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Social Media Sentiment Analysis) with Spearman Correlation1,2,3,4 and conclude that the Euro Stoxx 50 Index 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 Sell Euro Stoxx 50 Index stock.

Financial State Forecast for Euro Stoxx 50 Index Euro Stoxx 50 Index Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B1Ba2
Operational Risk 5643
Market Risk7059
Technical Analysis3674
Fundamental Analysis7283
Risk Unsystematic7776

Prediction Confidence Score

Trust metric by Neural Network: 73 out of 100 with 782 signals.

References

  1. R. Rockafellar and S. Uryasev. Optimization of conditional value-at-risk. Journal of Risk, 2:21–42, 2000.
  2. Bessler, D. A. R. A. Babula, (1987), "Forecasting wheat exports: Do exchange rates matter?" Journal of Business and Economic Statistics, 5, 397–406.
  3. M. Puterman. Markov Decision Processes: Discrete Stochastic Dynamic Programming. Wiley, New York, 1994.
  4. N. B ̈auerle and J. Ott. Markov decision processes with average-value-at-risk criteria. Mathematical Methods of Operations Research, 74(3):361–379, 2011
  5. Abadie A, Diamond A, Hainmueller J. 2010. Synthetic control methods for comparative case studies: estimat- ing the effect of California's tobacco control program. J. Am. Stat. Assoc. 105:493–505
  6. Wu X, Kumar V, Quinlan JR, Ghosh J, Yang Q, et al. 2008. Top 10 algorithms in data mining. Knowl. Inform. Syst. 14:1–37
  7. Barrett, C. B. (1997), "Heteroscedastic price forecasting for food security management in developing countries," Oxford Development Studies, 25, 225–236.
Frequently Asked QuestionsQ: What is the prediction methodology for Euro Stoxx 50 Index stock?
A: Euro Stoxx 50 Index stock prediction methodology: We evaluate the prediction models Modular Neural Network (Social Media Sentiment Analysis) and Spearman Correlation
Q: Is Euro Stoxx 50 Index stock a buy or sell?
A: The dominant strategy among neural network is to Sell Euro Stoxx 50 Index Stock.
Q: Is Euro Stoxx 50 Index stock a good investment?
A: The consensus rating for Euro Stoxx 50 Index is Sell and assigned short-term B1 & long-term Ba2 forecasted stock rating.
Q: What is the consensus rating of Euro Stoxx 50 Index stock?
A: The consensus rating for Euro Stoxx 50 Index is Sell.
Q: What is the prediction period for Euro Stoxx 50 Index stock?
A: The prediction period for Euro Stoxx 50 Index is (n+1 year)

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