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

MGIC Research Report

Summary

The prediction of stock price performance is a difficult and complex problem. Multivariate analytical techniques using both quantitative and qualitative variables have repeatedly been used to help form the basis of investor stock price expectations and, hence, influence investment decision making. However, the performance of multivariate analytical techniques is often less than conclusive and needs to be improved to more accurately forecast stock price performance. A neural network method has demonstrated its capability of addressing complex problems. We evaluate MGIC prediction models with Modular Neural Network (Speculative Sentiment Analysis) and Spearman Correlation^1,2,3,4 and conclude that the MTG 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 Wait until speculative trend diminishes MTG stock.

Key Points

1. Short/Long Term Stocks
2. Which neural network is best for prediction?
3. Can we predict stock market using machine learning?

MTG Target Price Prediction Modeling Methodology

We consider MGIC Stock Decision Process with Modular Neural Network (Speculative Sentiment Analysis) where A is the set of discrete actions of MTG 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= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Modular Neural Network (Speculative Sentiment Analysis)) X S(n):→ (n+4 weeks) $\overrightarrow{R}=\left(r_1,r_2,r_3\right)$

n:Time series to forecast

p:Price signals of MTG stock

j:Nash equilibria (Neural Network)

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?

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

Sample Set: Neural Network
Stock/Index: MTG MGIC
Time series to forecast n: 20 Nov 2022 for (n+4 weeks)

According to price forecasts for (n+4 weeks) period: The dominant strategy among neural network is to Wait until speculative trend diminishes MTG 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 MGIC

1. However, the designation of the hedging relationship using the same hedge ratio as that resulting from the quantities of the hedged item and the hedging instrument that the entity actually uses shall not reflect an imbalance between the weightings of the hedged item and the hedging instrument that would in turn create hedge ineffectiveness (irrespective of whether recognised or not) that could result in an accounting outcome that would be inconsistent with the purpose of hedge accounting. Hence, for the purpose of designating a hedging relationship, an entity must adjust the hedge ratio that results from the quantities of the hedged item and the hedging instrument that the entity actually uses if that is needed to avoid such an imbalance
2. For the purpose of this Standard, reasonable and supportable information is that which is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions. Information that is available for financial reporting purposes is considered to be available without undue cost or effort.
3. An entity shall assess whether contractual cash flows are solely payments of principal and interest on the principal amount outstanding for the currency in which the financial asset is denominated.
4. When an entity first applies this Standard, it may choose as its accounting policy to continue to apply the hedge accounting requirements of IAS 39 instead of the requirements in Chapter 6 of this Standard. An entity shall apply that policy to all of its hedging relationships. An entity that chooses that policy shall also apply IFRIC 16 Hedges of a Net Investment in a Foreign Operation without the amendments that conform that Interpretation to the requirements in Chapter 6 of this Standard.

*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

MGIC assigned short-term B3 & long-term B1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Speculative Sentiment Analysis) with Spearman Correlation^1,2,3,4 and conclude that the MTG 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 Wait until speculative trend diminishes MTG stock.

Financial State Forecast for MTG MGIC Stock Options & Futures

Rating	Short-Term	Long-Term Senior
Outlook*	B3	B1
Operational Risk	74	47
Market Risk	31	48
Technical Analysis	54	62
Fundamental Analysis	30	53
Risk Unsystematic	54	78

Prediction Confidence Score

Trust metric by Neural Network: 89 out of 100 with 617 signals.

References

1. Bai J. 2003. Inferential theory for factor models of large dimensions. Econometrica 71:135–71
2. Gentzkow M, Kelly BT, Taddy M. 2017. Text as data. NBER Work. Pap. 23276
3. Matzkin RL. 2007. Nonparametric identification. In Handbook of Econometrics, Vol. 6B, ed. J Heckman, E Learner, pp. 5307–68. Amsterdam: Elsevier
4. 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
5. Morris CN. 1983. Parametric empirical Bayes inference: theory and applications. J. Am. Stat. Assoc. 78:47–55
6. Athey S, Imbens GW. 2017b. The state of applied econometrics: causality and policy evaluation. J. Econ. Perspect. 31:3–32
7. D. Bertsekas and J. Tsitsiklis. Neuro-dynamic programming. Athena Scientific, 1996.

Frequently Asked Questions

Q: What is the prediction methodology for MTG stock?
A: MTG stock prediction methodology: We evaluate the prediction models Modular Neural Network (Speculative Sentiment Analysis) and Spearman Correlation
Q: Is MTG stock a buy or sell?
A: The dominant strategy among neural network is to Wait until speculative trend diminishes MTG Stock.
Q: Is MGIC stock a good investment?
A: The consensus rating for MGIC is Wait until speculative trend diminishes and assigned short-term B3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of MTG stock?
A: The consensus rating for MTG is Wait until speculative trend diminishes.
Q: What is the prediction period for MTG stock?
A: The prediction period for MTG is (n+4 weeks)

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