Modelling A.I. in Economics

Can neural networks predict stock market? (WU Stock Forecast) (Forecast)

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 evaluate Western Union prediction models with Modular Neural Network (CNN Layer) and ElasticNet Regression1,2,3,4 and conclude that the WU 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 Buy WU stock.


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

Key Points

  1. Investment Risk
  2. Stock Forecast Based On a Predictive Algorithm
  3. Market Risk

WU Target Price Prediction Modeling Methodology

How to predict stock price movements based on quantitative market data modeling is an attractive topic. In front of the market news and stock prices that are commonly believed as two important market data sources, how to extract and exploit the hidden information within the raw data and make both accurate and fast predictions simultaneously becomes a challenging problem. In this paper, we present the design and architecture of our trading signal mining platform that employs extreme learning machine (ELM) to make stock price prediction based on those two data sources concurrently. We consider Western Union Stock Decision Process with ElasticNet Regression where A is the set of discrete actions of WU 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 (CNN Layer)) X S(n):→ (n+16 weeks) e x rx

n:Time series to forecast

p:Price signals of WU 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?

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


Sample Set: Neural Network
Stock/Index: WU Western Union
Time series to forecast n: 05 Nov 2022 for (n+16 weeks)

According to price forecasts for (n+16 weeks) period: The dominant strategy among neural network is to Buy WU 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 Western Union

  1. When a group of items that constitute a net position is designated as a hedged item, an entity shall designate the overall group of items that includes the items that can make up the net position. An entity is not permitted to designate a non-specific abstract amount of a net position. For example, an entity has a group of firm sale commitments in nine months' time for FC100 and a group of firm purchase commitments in 18 months' time for FC120. The entity cannot designate an abstract amount of a net position up to FC20. Instead, it must designate a gross amount of purchases and a gross amount of sales that together give rise to the hedged net position. An entity shall designate gross positions that give rise to the net position so that the entity is able to comply with the requirements for the accounting for qualifying hedging relationships.
  2. The methods used to determine whether credit risk has increased significantly on a financial instrument since initial recognition should consider the characteristics of the financial instrument (or group of financial instruments) and the default patterns in the past for comparable financial instruments. Despite the requirement in paragraph 5.5.9, for financial instruments for which default patterns are not concentrated at a specific point during the expected life of the financial instrument, changes in the risk of a default occurring over the next 12 months may be a reasonable approximation of the changes in the lifetime risk of a default occurring. In such cases, an entity may use changes in the risk of a default occurring over the next 12 months to determine whether credit risk has increased significantly since initial recognition, unless circumstances indicate that a lifetime assessment is necessary
  3. IFRS 15, issued in May 2014, amended paragraphs 3.1.1, 4.2.1, 5.1.1, 5.2.1, 5.7.6, B3.2.13, B5.7.1, C5 and C42 and deleted paragraph C16 and its related heading. Paragraphs 5.1.3 and 5.7.1A, and a definition to Appendix A, were added. An entity shall apply those amendments when it applies IFRS 15.
  4. If an entity measures a hybrid contract at fair value in accordance with paragraphs 4.1.2A, 4.1.4 or 4.1.5 but the fair value of the hybrid contract had not been measured in comparative reporting periods, the fair value of the hybrid contract in the comparative reporting periods shall be the sum of the fair values of the components (ie the non-derivative host and the embedded derivative) at the end of each comparative reporting period if the entity restates prior periods (see paragraph 7.2.15).

*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

Western Union assigned short-term B3 & long-term Ba3 forecasted stock rating. We evaluate the prediction models Modular Neural Network (CNN Layer) with ElasticNet Regression1,2,3,4 and conclude that the WU 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 Buy WU stock.

Financial State Forecast for WU Western Union Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B3Ba3
Operational Risk 6053
Market Risk4162
Technical Analysis5483
Fundamental Analysis3568
Risk Unsystematic6639

Prediction Confidence Score

Trust metric by Neural Network: 79 out of 100 with 463 signals.

References

  1. V. Mnih, A. P. Badia, M. Mirza, A. Graves, T. P. Lillicrap, T. Harley, D. Silver, and K. Kavukcuoglu. Asynchronous methods for deep reinforcement learning. In Proceedings of the 33nd International Conference on Machine Learning, ICML 2016, New York City, NY, USA, June 19-24, 2016, pages 1928–1937, 2016
  2. Y. Le Tallec. Robust, risk-sensitive, and data-driven control of Markov decision processes. PhD thesis, Massachusetts Institute of Technology, 2007.
  3. N. B ̈auerle and A. Mundt. Dynamic mean-risk optimization in a binomial model. Mathematical Methods of Operations Research, 70(2):219–239, 2009.
  4. LeCun Y, Bengio Y, Hinton G. 2015. Deep learning. Nature 521:436–44
  5. Scholkopf B, Smola AJ. 2001. Learning with Kernels: Support Vector Machines, Regularization, Optimization, and Beyond. Cambridge, MA: MIT Press
  6. Barkan O. 2016. Bayesian neural word embedding. arXiv:1603.06571 [math.ST]
  7. N. B ̈auerle and A. Mundt. Dynamic mean-risk optimization in a binomial model. Mathematical Methods of Operations Research, 70(2):219–239, 2009.
Frequently Asked QuestionsQ: What is the prediction methodology for WU stock?
A: WU stock prediction methodology: We evaluate the prediction models Modular Neural Network (CNN Layer) and ElasticNet Regression
Q: Is WU stock a buy or sell?
A: The dominant strategy among neural network is to Buy WU Stock.
Q: Is Western Union stock a good investment?
A: The consensus rating for Western Union is Buy and assigned short-term B3 & long-term Ba3 forecasted stock rating.
Q: What is the consensus rating of WU stock?
A: The consensus rating for WU is Buy.
Q: What is the prediction period for WU stock?
A: The prediction period for WU is (n+16 weeks)

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