Modelling A.I. in Economics

Can we predict stock market using machine learning? (WST Stock Forecast) (Forecast)

One decision in Stock Market can make huge impact on an investor's life. The stock market is a complex system and often covered in mystery, it is therefore, very difficult to analyze all the impacting factors before making a decision. In this research, we have tried to design a stock market prediction model which is based on different factors. We evaluate West Pharmaceutical Services prediction models with Modular Neural Network (News Feed Sentiment Analysis) and Ridge Regression1,2,3,4 and conclude that the WST stock is predictable in the short/long term. According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Hold WST stock.


Keywords: WST, West Pharmaceutical Services, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. How do predictive algorithms actually work?
  2. Technical Analysis with Algorithmic Trading
  3. Can stock prices be predicted?

WST Target Price Prediction Modeling Methodology

The stock market is an interesting industry to study. There are various variations present in it. Many experts have been studying and researching on the various trends that the stock market goes through. One of the major studies has been the attempt to predict the stock prices of various companies based on historical data. Prediction of stock prices will greatly help people to understand where and how to invest so that the risk of losing money is minimized. We consider West Pharmaceutical Services Stock Decision Process with Ridge Regression where A is the set of discrete actions of WST 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(Ridge 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 (News Feed Sentiment Analysis)) X S(n):→ (n+1 year) S = s 1 s 2 s 3

n:Time series to forecast

p:Price signals of WST 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?

WST Stock Forecast (Buy or Sell) for (n+1 year)

Sample Set: Neural Network
Stock/Index: WST West Pharmaceutical Services
Time series to forecast n: 15 Nov 2022 for (n+1 year)

According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Hold WST 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 West Pharmaceutical Services

  1. Expected credit losses are a probability-weighted estimate of credit losses (ie the present value of all cash shortfalls) over the expected life of the financial instrument. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. Because expected credit losses consider the amount and timing of payments, a credit loss arises even if the entity expects to be paid in full but later than when contractually due.
  2. A similar example of a non-financial item is a specific type of crude oil from a particular oil field that is priced off the relevant benchmark crude oil. If an entity sells that crude oil under a contract using a contractual pricing formula that sets the price per barrel at the benchmark crude oil price minus CU10 with a floor of CU15, the entity can designate as the hedged item the entire cash flow variability under the sales contract that is attributable to the change in the benchmark crude oil price. However, the entity cannot designate a component that is equal to the full change in the benchmark crude oil price. Hence, as long as the forward price (for each delivery) does not fall below CU25, the hedged item has the same cash flow variability as a crude oil sale at the benchmark crude oil price (or with a positive spread). However, if the forward price for any delivery falls below CU25, the hedged item has a lower cash flow variability than a crude oil sale at the benchmark crude oil price (or with a positive spread).
  3. The requirement that an economic relationship exists means that the hedging instrument and the hedged item have values that generally move in the opposite direction because of the same risk, which is the hedged risk. Hence, there must be an expectation that the value of the hedging instrument and the value of the hedged item will systematically change in response to movements in either the same underlying or underlyings that are economically related in such a way that they respond in a similar way to the risk that is being hedged (for example, Brent and WTI crude oil).
  4. An alternative benchmark rate designated as a non-contractually specified risk component that is not separately identifiable (see paragraphs 6.3.7(a) and B6.3.8) at the date it is designated shall be deemed to have met that requirement at that date, if, and only if, the entity reasonably expects the alternative benchmark rate will be separately identifiable within 24 months. The 24-month period applies to each alternative benchmark rate separately and starts from the date the entity designates the alternative benchmark rate as a non-contractually specified risk component for the first time (ie the 24- month period applies on a rate-by-rate basis).

*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

West Pharmaceutical Services assigned short-term Ba3 & long-term B1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (News Feed Sentiment Analysis) with Ridge Regression1,2,3,4 and conclude that the WST stock is predictable in the short/long term. According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Hold WST stock.

Financial State Forecast for WST West Pharmaceutical Services Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba3B1
Operational Risk 7481
Market Risk8289
Technical Analysis7433
Fundamental Analysis3343
Risk Unsystematic7037

Prediction Confidence Score

Trust metric by Neural Network: 86 out of 100 with 690 signals.

References

  1. Wan M, Wang D, Goldman M, Taddy M, Rao J, et al. 2017. Modeling consumer preferences and price sensitiv- ities from large-scale grocery shopping transaction logs. In Proceedings of the 26th International Conference on the World Wide Web, pp. 1103–12. New York: ACM
  2. E. Altman. Constrained Markov decision processes, volume 7. CRC Press, 1999
  3. Bell RM, Koren Y. 2007. Lessons from the Netflix prize challenge. ACM SIGKDD Explor. Newsl. 9:75–79
  4. Thompson WR. 1933. On the likelihood that one unknown probability exceeds another in view of the evidence of two samples. Biometrika 25:285–94
  5. Burgess, D. F. (1975), "Duality theory and pitfalls in the specification of technologies," Journal of Econometrics, 3, 105–121.
  6. Rumelhart DE, Hinton GE, Williams RJ. 1986. Learning representations by back-propagating errors. Nature 323:533–36
  7. Kitagawa T, Tetenov A. 2015. Who should be treated? Empirical welfare maximization methods for treatment choice. Tech. Rep., Cent. Microdata Methods Pract., Inst. Fiscal Stud., London
Frequently Asked QuestionsQ: What is the prediction methodology for WST stock?
A: WST stock prediction methodology: We evaluate the prediction models Modular Neural Network (News Feed Sentiment Analysis) and Ridge Regression
Q: Is WST stock a buy or sell?
A: The dominant strategy among neural network is to Hold WST Stock.
Q: Is West Pharmaceutical Services stock a good investment?
A: The consensus rating for West Pharmaceutical Services is Hold and assigned short-term Ba3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of WST stock?
A: The consensus rating for WST is Hold.
Q: What is the prediction period for WST stock?
A: The prediction period for WST is (n+1 year)

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