Modelling A.I. in Economics

Can stock prices be predicted? (MTB Stock Forecast)

Stock market prediction is a major exertion in the field of finance and establishing businesses. Stock market is totally uncertain as the prices of stocks keep fluctuating on a daily basis because of numerous factors that influence it. One of the traditional ways of predicting stock prices was by using only historical data. But with time it was observed that other factors such as peoples' sentiments and other news events occurring in and around the country affect the stock market, for e.g. national elections, natural calamity etc. We evaluate M&T Bank prediction models with Modular Neural Network (Speculative Sentiment Analysis) and Beta1,2,3,4 and conclude that the MTB stock is predictable in the short/long term. According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Buy MTB stock.


Keywords: MTB, M&T Bank, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. What is a prediction confidence?
  2. What is the use of Markov decision process?
  3. What are buy sell or hold recommendations?

MTB Target Price Prediction Modeling Methodology

The categorization of high dimensional data present a fascinating challenge to machine learning models as frequent number of highly correlated dimensions or attributes can affect the accuracy of classification model. In this paper, the problem of high dimensionality of stock exchange is investigated to predict the market trends by applying the principal component analysis (PCA) with linear regression. PCA can help to improve the predictive performance of machine learning methods while reducing the redundancy among the data. We consider M&T Bank Stock Decision Process with Beta where A is the set of discrete actions of MTB 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(Beta)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 (Speculative Sentiment Analysis)) X S(n):→ (n+6 month) i = 1 n r i

n:Time series to forecast

p:Price signals of MTB 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?

MTB Stock Forecast (Buy or Sell) for (n+6 month)


Sample Set: Neural Network
Stock/Index: MTB M&T Bank
Time series to forecast n: 09 Nov 2022 for (n+6 month)

According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Buy MTB 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 M&T Bank

  1. For example, when the critical terms (such as the nominal amount, maturity and underlying) of the hedging instrument and the hedged item match or are closely aligned, it might be possible for an entity to conclude on the basis of a qualitative assessment of those critical terms that the hedging instrument and the hedged item have values that will generally move in the opposite direction because of the same risk and hence that an economic relationship exists between the hedged item and the hedging instrument (see paragraphs B6.4.4–B6.4.6).
  2. When assessing a modified time value of money element, an entity must consider factors that could affect future contractual cash flows. For example, if an entity is assessing a bond with a five-year term and the variable interest rate is reset every six months to a five-year rate, the entity cannot conclude that the contractual cash flows are solely payments of principal and interest on the principal amount outstanding simply because the interest rate curve at the time of the assessment is such that the difference between a five-year interest rate and a six-month interest rate is not significant. Instead, the entity must also consider whether the relationship between the five-year interest rate and the six-month interest rate could change over the life of the instrument such that the contractual (undiscounted) cash flows over the life of the instrument could be significantly different from the (undiscounted) benchmark cash flows. However, an entity must consider only reasonably possible scenarios instead of every possible scenario. If an entity concludes that the contractual (undiscounted) cash flows could be significantly different from the (undiscounted) benchmark cash flows, the financial asset does not meet the condition in paragraphs 4.1.2(b) and 4.1.2A(b) and therefore cannot be measured at amortised cost or fair value through other comprehensive income.
  3. An entity's risk management is the main source of information to perform the assessment of whether a hedging relationship meets the hedge effectiveness requirements. This means that the management information (or analysis) used for decision-making purposes can be used as a basis for assessing whether a hedging relationship meets the hedge effectiveness requirements.
  4. For the avoidance of doubt, the effects of replacing the original counterparty with a clearing counterparty and making the associated changes as described in paragraph 6.5.6 shall be reflected in the measurement of the hedging instrument and therefore in the assessment of hedge effectiveness and the measurement of hedge effectiveness

*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

M&T Bank assigned short-term Ba1 & long-term Ba1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Speculative Sentiment Analysis) with Beta1,2,3,4 and conclude that the MTB stock is predictable in the short/long term. According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Buy MTB stock.

Financial State Forecast for MTB M&T Bank Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba1Ba1
Operational Risk 7684
Market Risk7565
Technical Analysis6257
Fundamental Analysis8870
Risk Unsystematic5078

Prediction Confidence Score

Trust metric by Neural Network: 92 out of 100 with 560 signals.

References

  1. M. J. Hausknecht. Cooperation and Communication in Multiagent Deep Reinforcement Learning. PhD thesis, The University of Texas at Austin, 2016
  2. Dudik M, Erhan D, Langford J, Li L. 2014. Doubly robust policy evaluation and optimization. Stat. Sci. 29:485–511
  3. M. Babes, E. M. de Cote, and M. L. Littman. Social reward shaping in the prisoner's dilemma. In 7th International Joint Conference on Autonomous Agents and Multiagent Systems (AAMAS 2008), Estoril, Portugal, May 12-16, 2008, Volume 3, pages 1389–1392, 2008.
  4. A. Eck, L. Soh, S. Devlin, and D. Kudenko. Potential-based reward shaping for finite horizon online POMDP planning. Autonomous Agents and Multi-Agent Systems, 30(3):403–445, 2016
  5. Zubizarreta JR. 2015. Stable weights that balance covariates for estimation with incomplete outcome data. J. Am. Stat. Assoc. 110:910–22
  6. D. Bertsekas and J. Tsitsiklis. Neuro-dynamic programming. Athena Scientific, 1996.
  7. Athey S, Blei D, Donnelly R, Ruiz F. 2017b. Counterfactual inference for consumer choice across many prod- uct categories. AEA Pap. Proc. 108:64–67
Frequently Asked QuestionsQ: What is the prediction methodology for MTB stock?
A: MTB stock prediction methodology: We evaluate the prediction models Modular Neural Network (Speculative Sentiment Analysis) and Beta
Q: Is MTB stock a buy or sell?
A: The dominant strategy among neural network is to Buy MTB Stock.
Q: Is M&T Bank stock a good investment?
A: The consensus rating for M&T Bank is Buy and assigned short-term Ba1 & long-term Ba1 forecasted stock rating.
Q: What is the consensus rating of MTB stock?
A: The consensus rating for MTB is Buy.
Q: What is the prediction period for MTB stock?
A: The prediction period for MTB is (n+6 month)

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