Modelling A.I. in Economics

American Electric Power Stock Forecast, Price & Rating (AEP) (Forecast)

Several intelligent data mining approaches, including neural networks, have been widely employed by academics during the last decade. In today's rapidly evolving economy, stock market data prediction and analysis play a significant role. Several non-linear models like neural network, generalized autoregressive conditional heteroskedasticity (GARCH) and autoregressive conditional heteroscedasticity (ARCH) as well as linear models like Auto- Regressive Integrated Moving Average (ARIMA), Moving Average (MA) and Auto Regressive (AR) may be used for stock forecasting. We evaluate American Electric Power prediction models with Modular Neural Network (Market Volatility Analysis) and Pearson Correlation1,2,3,4 and conclude that the AEP stock is predictable in the short/long term. According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Buy AEP stock.


Keywords: AEP, American Electric Power, 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 is prediction model?
  3. What is the use of Markov decision process?

AEP Target Price Prediction Modeling Methodology

Predictions on stock market prices are a great challenge due to the fact that it is an immensely complex, chaotic and dynamic environment. There are many studies from various areas aiming to take on that challenge and Machine Learning approaches have been the focus of many of them. There are many examples of Machine Learning algorithms been able to reach satisfactory results when doing that type of prediction. This article studies the usage of LSTM networks on that scenario, to predict future trends of stock prices based on the price history, alongside with technical analysis indicators. We consider American Electric Power Stock Decision Process with Pearson Correlation where A is the set of discrete actions of AEP 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(Pearson 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 (Market Volatility Analysis)) X S(n):→ (n+4 weeks) i = 1 n r i

n:Time series to forecast

p:Price signals of AEP 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?

AEP Stock Forecast (Buy or Sell) for (n+4 weeks)


Sample Set: Neural Network
Stock/Index: AEP American Electric Power
Time series to forecast n: 04 Nov 2022 for (n+4 weeks)

According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Buy AEP 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 American Electric Power

  1. Paragraph 5.7.5 permits an entity to make an irrevocable election to present in other comprehensive income changes in the fair value of an investment in an equity instrument that is not held for trading. This election is made on an instrument-by-instrument (ie share-by-share) basis. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss. However, the entity may transfer the cumulative gain or loss within equity. Dividends on such investments are recognised in profit or loss in accordance with paragraph 5.7.6 unless the dividend clearly represents a recovery of part of the cost of the investment.
  2. In applying the effective interest method, an entity identifies fees that are an integral part of the effective interest rate of a financial instrument. The description of fees for financial services may not be indicative of the nature and substance of the services provided. Fees that are an integral part of the effective interest rate of a financial instrument are treated as an adjustment to the effective interest rate, unless the financial instrument is measured at fair value, with the change in fair value being recognised in profit or loss. In those cases, the fees are recognised as revenue or expense when the instrument is initially recognised.
  3. Conversely, if the critical terms of the hedging instrument and the hedged item are not closely aligned, there is an increased level of uncertainty about the extent of offset. Consequently, the hedge effectiveness during the term of the hedging relationship is more difficult to predict. In such a situation it might only be possible for an entity to conclude on the basis of a quantitative assessment that an economic relationship exists between the hedged item and the hedging instrument (see paragraphs B6.4.4–B6.4.6). In some situations a quantitative assessment might also be needed to assess whether the hedge ratio used for designating the hedging relationship meets the hedge effectiveness requirements (see paragraphs B6.4.9–B6.4.11). An entity can use the same or different methods for those two different purposes.
  4. A single hedging instrument may be designated as a hedging instrument of more than one type of risk, provided that there is a specific designation of the hedging instrument and of the different risk positions as hedged items. Those hedged items can be in different hedging relationships.

*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

American Electric Power assigned short-term B1 & long-term B3 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Market Volatility Analysis) with Pearson Correlation1,2,3,4 and conclude that the AEP stock is predictable in the short/long term. According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Buy AEP stock.

Financial State Forecast for AEP American Electric Power Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B1B3
Operational Risk 5675
Market Risk7749
Technical Analysis5331
Fundamental Analysis7745
Risk Unsystematic3432

Prediction Confidence Score

Trust metric by Neural Network: 80 out of 100 with 486 signals.

References

  1. Chamberlain G. 2000. Econometrics and decision theory. J. Econom. 95:255–83
  2. Firth JR. 1957. A synopsis of linguistic theory 1930–1955. In Studies in Linguistic Analysis (Special Volume of the Philological Society), ed. JR Firth, pp. 1–32. Oxford, UK: Blackwell
  3. Bennett J, Lanning S. 2007. The Netflix prize. In Proceedings of KDD Cup and Workshop 2007, p. 35. New York: ACM
  4. S. Bhatnagar, R. Sutton, M. Ghavamzadeh, and M. Lee. Natural actor-critic algorithms. Automatica, 45(11): 2471–2482, 2009
  5. A. K. Agogino and K. Tumer. Analyzing and visualizing multiagent rewards in dynamic and stochastic environments. Journal of Autonomous Agents and Multi-Agent Systems, 17(2):320–338, 2008
  6. D. Bertsekas. Dynamic programming and optimal control. Athena Scientific, 1995.
  7. Andrews, D. W. K. (1993), "Tests for parameter instability and structural change with unknown change point," Econometrica, 61, 821–856.
Frequently Asked QuestionsQ: What is the prediction methodology for AEP stock?
A: AEP stock prediction methodology: We evaluate the prediction models Modular Neural Network (Market Volatility Analysis) and Pearson Correlation
Q: Is AEP stock a buy or sell?
A: The dominant strategy among neural network is to Buy AEP Stock.
Q: Is American Electric Power stock a good investment?
A: The consensus rating for American Electric Power is Buy and assigned short-term B1 & long-term B3 forecasted stock rating.
Q: What is the consensus rating of AEP stock?
A: The consensus rating for AEP is Buy.
Q: What is the prediction period for AEP stock?
A: The prediction period for AEP is (n+4 weeks)

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