Can stock prices be predicted? (MCD Stock Forecast)

This paper surveys machine learning techniques for stock market prediction. The prediction of stock markets is regarded as a challenging task of financial time series prediction. We evaluate McDonald's prediction models with Ensemble Learning (ML) and Multiple Regression^1,2,3,4 and conclude that the MCD stock is predictable in the short/long term. According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Hold MCD stock.

Keywords: MCD, McDonald's, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

1. What is the best way to predict stock prices?
2. Is Target price a good indicator?
3. Short/Long Term Stocks

MCD Target Price Prediction Modeling Methodology

The presented paper modeled and predicted stock returns using LSTM. The historical data of stock market were transformed into 30-days-long sequences with 10 learning features and 7-day earning rate labeling. The model was fitted by training on 1200000 sequences and tested using the other 350000 sequences. We consider McDonald's Stock Decision Process with Multiple Regression where A is the set of discrete actions of MCD 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(Multiple Regression)^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(Ensemble Learning (ML)) X S(n):→ (n+8 weeks) $\overrightarrow{R}=\left(r_1,r_2,r_3\right)$

n:Time series to forecast

p:Price signals of MCD 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?

MCD Stock Forecast (Buy or Sell) for (n+8 weeks)

Sample Set: Neural Network
Stock/Index: MCD McDonald's
Time series to forecast n: 06 Nov 2022 for (n+8 weeks)

According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Hold MCD 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 McDonald's

1. If a put option written by an entity prevents a transferred asset from being derecognised and the entity measures the transferred asset at fair value, the associated liability is measured at the option exercise price plus the time value of the option. The measurement of the asset at fair value is limited to the lower of the fair value and the option exercise price because the entity has no right to increases in the fair value of the transferred asset above the exercise price of the option. This ensures that the net carrying amount of the asset and the associated liability is the fair value of the put option obligation. For example, if the fair value of the underlying asset is CU120, the option exercise price is CU100 and the time value of the option is CU5, the carrying amount of the associated liability is CU105 (CU100 + CU5) and the carrying amount of the asset is CU100 (in this case the option exercise price).
2. At the date of initial application, an entity shall use reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that a financial instrument was initially recognised (or for loan commitments and financial guarantee contracts at the date that the entity became a party to the irrevocable commitment in accordance with paragraph 5.5.6) and compare that to the credit risk at the date of initial application of this Standard.
3. At the date of initial application, an entity shall determine whether the treatment in paragraph 5.7.7 would create or enlarge an accounting mismatch in profit or loss on the basis of the facts and circumstances that exist at the date of initial application. This Standard shall be applied retrospectively on the basis of that determination.
4. If subsequently an entity reasonably expects that the alternative benchmark rate will not be separately identifiable within 24 months from the date the entity designated it as a non-contractually specified risk component for the first time, the entity shall cease applying the requirement in paragraph 6.9.11 to that alternative benchmark rate and discontinue hedge accounting prospectively from the date of that reassessment for all hedging relationships in which the alternative benchmark rate was designated as a noncontractually specified risk component.

*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

McDonald's assigned short-term Ba3 & long-term B2 forecasted stock rating. We evaluate the prediction models Ensemble Learning (ML) with Multiple Regression^1,2,3,4 and conclude that the MCD stock is predictable in the short/long term. According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Hold MCD stock.

Financial State Forecast for MCD McDonald's Stock Options & Futures

Rating	Short-Term	Long-Term Senior
Outlook*	Ba3	B2
Operational Risk	50	47
Market Risk	68	37
Technical Analysis	90	81
Fundamental Analysis	62	40
Risk Unsystematic	56	66

Prediction Confidence Score

Trust metric by Neural Network: 75 out of 100 with 765 signals.

References

1. Zubizarreta JR. 2015. Stable weights that balance covariates for estimation with incomplete outcome data. J. Am. Stat. Assoc. 110:910–22
2. Mikolov T, Chen K, Corrado GS, Dean J. 2013a. Efficient estimation of word representations in vector space. arXiv:1301.3781 [cs.CL]
3. R. Sutton and A. Barto. Reinforcement Learning. The MIT Press, 1998
4. Hoerl AE, Kennard RW. 1970. Ridge regression: biased estimation for nonorthogonal problems. Technometrics 12:55–67
5. Wu X, Kumar V, Quinlan JR, Ghosh J, Yang Q, et al. 2008. Top 10 algorithms in data mining. Knowl. Inform. Syst. 14:1–37
6. Arora S, Li Y, Liang Y, Ma T. 2016. RAND-WALK: a latent variable model approach to word embeddings. Trans. Assoc. Comput. Linguist. 4:385–99
7. R. Sutton and A. Barto. Introduction to reinforcement learning. MIT Press, 1998

Frequently Asked Questions

Q: What is the prediction methodology for MCD stock?
A: MCD stock prediction methodology: We evaluate the prediction models Ensemble Learning (ML) and Multiple Regression
Q: Is MCD stock a buy or sell?
A: The dominant strategy among neural network is to Hold MCD Stock.
Q: Is McDonald's stock a good investment?
A: The consensus rating for McDonald's is Hold and assigned short-term Ba3 & long-term B2 forecasted stock rating.
Q: What is the consensus rating of MCD stock?
A: The consensus rating for MCD is Hold.
Q: What is the prediction period for MCD stock?
A: The prediction period for MCD is (n+8 weeks)