Modelling A.I. in Economics

Should I Buy Stocks Now or Wait Amid Such Uncertainty? (NFLX Stock Prediction)

The main objective of this research is to predict the market performance on day closing using different machine learning techniques. The prediction model uses different attributes as an input and predicts market as Positive & Negative. We evaluate Netflix prediction models with Multi-Instance Learning (ML) and Ridge Regression1,2,3,4 and conclude that the NFLX stock is predictable in the short/long term. According to price forecasts for (n+16 weeks) period: The dominant strategy among neural network is to Hold NFLX stock.


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

Key Points

  1. How do you pick a stock?
  2. What are buy sell or hold recommendations?
  3. Buy, Sell and Hold Signals

NFLX 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 Netflix Stock Decision Process with Ridge Regression where A is the set of discrete actions of NFLX 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= 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(Multi-Instance Learning (ML)) X S(n):→ (n+16 weeks) i = 1 n a i

n:Time series to forecast

p:Price signals of NFLX 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?

NFLX Stock Forecast (Buy or Sell) for (n+16 weeks)

Sample Set: Neural Network
Stock/Index: NFLX Netflix
Time series to forecast n: 27 Oct 2022 for (n+16 weeks)

According to price forecasts for (n+16 weeks) period: The dominant strategy among neural network is to Hold NFLX 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 Netflix

  1. For the purposes of applying the requirement in paragraph 5.7.7(a), credit risk is different from asset-specific performance risk. Asset-specific performance risk is not related to the risk that an entity will fail to discharge a particular obligation but instead it is related to the risk that a single asset or a group of assets will perform poorly (or not at all).
  2. One of the defining characteristics of a derivative is that it has an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. An option contract meets that definition because the premium is less than the investment that would be required to obtain the underlying financial instrument to which the option is linked. A currency swap that requires an initial exchange of different currencies of equal fair values meets the definition because it has a zero initial net investment.
  3. If an entity originates a loan that bears an off-market interest rate (eg 5 per cent when the market rate for similar loans is 8 per cent), and receives an upfront fee as compensation, the entity recognises the loan at its fair value, ie net of the fee it receives.
  4. If the group of items does not have any offsetting risk positions (for example, a group of foreign currency expenses that affect different line items in the statement of profit or loss and other comprehensive income that are hedged for foreign currency risk) then the reclassified hedging instrument gains or losses shall be apportioned to the line items affected by the hedged items. This apportionment shall be done on a systematic and rational basis and shall not result in the grossing up of the net gains or losses arising from a single hedging instrument.

*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

Netflix assigned short-term Ba3 & long-term B1 forecasted stock rating. We evaluate the prediction models Multi-Instance Learning (ML) with Ridge Regression1,2,3,4 and conclude that the NFLX stock is predictable in the short/long term. According to price forecasts for (n+16 weeks) period: The dominant strategy among neural network is to Hold NFLX stock.

Financial State Forecast for NFLX Netflix Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba3B1
Operational Risk 5653
Market Risk5873
Technical Analysis6539
Fundamental Analysis5873
Risk Unsystematic7845

Prediction Confidence Score

Trust metric by Neural Network: 85 out of 100 with 756 signals.

References

  1. Wager S, Athey S. 2017. Estimation and inference of heterogeneous treatment effects using random forests. J. Am. Stat. Assoc. 113:1228–42
  2. Efron B, Hastie T. 2016. Computer Age Statistical Inference, Vol. 5. Cambridge, UK: Cambridge Univ. Press
  3. K. Boda and J. Filar. Time consistent dynamic risk measures. Mathematical Methods of Operations Research, 63(1):169–186, 2006
  4. Dietterich TG. 2000. Ensemble methods in machine learning. In Multiple Classifier Systems: First International Workshop, Cagliari, Italy, June 21–23, pp. 1–15. Berlin: Springer
  5. J. Spall. Multivariate stochastic approximation using a simultaneous perturbation gradient approximation. IEEE Transactions on Automatic Control, 37(3):332–341, 1992.
  6. Chen, C. L. Liu (1993), "Joint estimation of model parameters and outlier effects in time series," Journal of the American Statistical Association, 88, 284–297.
  7. Hoerl AE, Kennard RW. 1970. Ridge regression: biased estimation for nonorthogonal problems. Technometrics 12:55–67
Frequently Asked QuestionsQ: What is the prediction methodology for NFLX stock?
A: NFLX stock prediction methodology: We evaluate the prediction models Multi-Instance Learning (ML) and Ridge Regression
Q: Is NFLX stock a buy or sell?
A: The dominant strategy among neural network is to Hold NFLX Stock.
Q: Is Netflix stock a good investment?
A: The consensus rating for Netflix is Hold and assigned short-term Ba3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of NFLX stock?
A: The consensus rating for NFLX is Hold.
Q: What is the prediction period for NFLX stock?
A: The prediction period for NFLX is (n+16 weeks)



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