Modelling A.I. in Economics

Is SLM Stock Expected to Go Up? (Stock Forecast) (Forecast)

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 Sallie Mae prediction models with Modular Neural Network (Market Direction Analysis) and ElasticNet Regression1,2,3,4 and conclude that the SLM stock is predictable in the short/long term. According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Sell SLM stock.


Keywords: SLM, Sallie Mae, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. Probability Distribution
  2. What statistical methods are used to analyze data?
  3. Can stock prices be predicted?

SLM Target Price Prediction Modeling Methodology

Stock market trading is an activity in which investors need fast and accurate information to make effective decisions. Since many stocks are traded on a stock exchange, numerous factors influence the decision-making process. Moreover, the behaviour of stock prices is uncertain and hard to predict. For these reasons, stock price prediction is an important process and a challenging one. We consider Sallie Mae Stock Decision Process with ElasticNet Regression where A is the set of discrete actions of SLM 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(ElasticNet Regression)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 (Market Direction Analysis)) X S(n):→ (n+3 month) e x rx

n:Time series to forecast

p:Price signals of SLM 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?

SLM Stock Forecast (Buy or Sell) for (n+3 month)

Sample Set: Neural Network
Stock/Index: SLM Sallie Mae
Time series to forecast n: 25 Oct 2022 for (n+3 month)

According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Sell SLM 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 Sallie Mae

  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. In addition to those hedging relationships specified in paragraph 6.9.1, an entity shall apply the requirements in paragraphs 6.9.11 and 6.9.12 to new hedging relationships in which an alternative benchmark rate is designated as a non-contractually specified risk component (see paragraphs 6.3.7(a) and B6.3.8) when, because of interest rate benchmark reform, that risk component is not separately identifiable at the date it is designated.
  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. The requirement that an economic relationship exists means that the hedging instrument and the hedged item have values that generally move in the opposite direction because of the same risk, which is the hedged risk. Hence, there must be an expectation that the value of the hedging instrument and the value of the hedged item will systematically change in response to movements in either the same underlying or underlyings that are economically related in such a way that they respond in a similar way to the risk that is being hedged (for example, Brent and WTI crude oil).

*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

Sallie Mae assigned short-term B1 & long-term B3 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Market Direction Analysis) with ElasticNet Regression1,2,3,4 and conclude that the SLM stock is predictable in the short/long term. According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Sell SLM stock.

Financial State Forecast for SLM Sallie Mae Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B1B3
Operational Risk 9032
Market Risk5633
Technical Analysis5774
Fundamental Analysis4741
Risk Unsystematic4146

Prediction Confidence Score

Trust metric by Neural Network: 87 out of 100 with 736 signals.

References

  1. Abadir, K. M., K. Hadri E. Tzavalis (1999), "The influence of VAR dimensions on estimator biases," Econometrica, 67, 163–181.
  2. Tibshirani R, Hastie T. 1987. Local likelihood estimation. J. Am. Stat. Assoc. 82:559–67
  3. Clements, M. P. D. F. Hendry (1997), "An empirical study of seasonal unit roots in forecasting," International Journal of Forecasting, 13, 341–355.
  4. E. Altman. Constrained Markov decision processes, volume 7. CRC Press, 1999
  5. Greene WH. 2000. Econometric Analysis. Upper Saddle River, N J: Prentice Hall. 4th ed.
  6. Bennett J, Lanning S. 2007. The Netflix prize. In Proceedings of KDD Cup and Workshop 2007, p. 35. New York: ACM
  7. Hartigan JA, Wong MA. 1979. Algorithm as 136: a k-means clustering algorithm. J. R. Stat. Soc. Ser. C 28:100–8
Frequently Asked QuestionsQ: What is the prediction methodology for SLM stock?
A: SLM stock prediction methodology: We evaluate the prediction models Modular Neural Network (Market Direction Analysis) and ElasticNet Regression
Q: Is SLM stock a buy or sell?
A: The dominant strategy among neural network is to Sell SLM Stock.
Q: Is Sallie Mae stock a good investment?
A: The consensus rating for Sallie Mae is Sell and assigned short-term B1 & long-term B3 forecasted stock rating.
Q: What is the consensus rating of SLM stock?
A: The consensus rating for SLM is Sell.
Q: What is the prediction period for SLM stock?
A: The prediction period for SLM is (n+3 month)

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