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

Stock price prediction has always been a challenging task for the researchers in financial domain. While the Efficient Market Hypothesis claims that it is impossible to predict stock prices accurately, there are work in the literature that have demonstrated that stock price movements can be forecasted with a reasonable degree of accuracy, if appropriate variables are chosen and suitable predictive models are built using those variables. In this work, we present a robust and accurate framework of stock price prediction using statistical, machine learning and deep learning methods We evaluate Alphabet (Class A) prediction models with Supervised Machine Learning (ML) and Stepwise Regression1,2,3,4 and conclude that the GOOGL 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 Hold GOOGL stock.


Keywords: GOOGL, Alphabet (Class A), stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. How do you pick a stock?
  2. Which neural network is best for prediction?
  3. Buy, Sell and Hold Signals

GOOGL Target Price Prediction Modeling Methodology

Recurrent Neural Networks (RNNs) is a sub type of neural networks that use feedback connections. Several types of RNN models are used in predicting financial time series. This study was conducted to develop models to predict daily stock prices based on Recurrent Neural Network (RNN) Approach and to measure the accuracy of the models developed and identify the shortcomings of the models if present. We consider Alphabet (Class A) Stock Decision Process with Stepwise Regression where A is the set of discrete actions of GOOGL 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(Stepwise 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(Supervised Machine Learning (ML)) X S(n):→ (n+6 month) i = 1 n a i

n:Time series to forecast

p:Price signals of GOOGL 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?

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


Sample Set: Neural Network
Stock/Index: GOOGL Alphabet (Class A)
Time series to forecast n: 14 Nov 2022 for (n+6 month)

According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Hold GOOGL 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 Alphabet (Class A)

  1. An example of a fair value hedge is a hedge of exposure to changes in the fair value of a fixed-rate debt instrument arising from changes in interest rates. Such a hedge could be entered into by the issuer or by the holder.
  2. The risk of a default occurring on financial instruments that have comparable credit risk is higher the longer the expected life of the instrument; for example, the risk of a default occurring on an AAA-rated bond with an expected life of 10 years is higher than that on an AAA-rated bond with an expected life of five years.
  3. A contractual cash flow characteristic does not affect the classification of the financial asset if it could have only a de minimis effect on the contractual cash flows of the financial asset. To make this determination, an entity must consider the possible effect of the contractual cash flow characteristic in each reporting period and cumulatively over the life of the financial instrument. In addition, if a contractual cash flow characteristic could have an effect on the contractual cash flows that is more than de minimis (either in a single reporting period or cumulatively) but that cash flow characteristic is not genuine, it does not affect the classification of a financial asset. A cash flow characteristic is not genuine if it affects the instrument's contractual cash flows only on the occurrence of an event that is extremely rare, highly abnormal and very unlikely to occur.
  4. If the underlyings are not the same but are economically related, there can be situations in which the values of the hedging instrument and the hedged item move in the same direction, for example, because the price differential between the two related underlyings changes while the underlyings themselves do not move significantly. That is still consistent with an economic relationship between the hedging instrument and the hedged item if the values of the hedging instrument and the hedged item are still expected to typically move in the opposite direction when the underlyings move.

*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

Alphabet (Class A) assigned short-term Baa2 & long-term B1 forecasted stock rating. We evaluate the prediction models Supervised Machine Learning (ML) with Stepwise Regression1,2,3,4 and conclude that the GOOGL 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 Hold GOOGL stock.

Financial State Forecast for GOOGL Alphabet (Class A) Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Baa2B1
Operational Risk 8631
Market Risk6145
Technical Analysis4159
Fundamental Analysis8881
Risk Unsystematic9075

Prediction Confidence Score

Trust metric by Neural Network: 92 out of 100 with 545 signals.

References

  1. D. S. Bernstein, S. Zilberstein, and N. Immerman. The complexity of decentralized control of Markov Decision Processes. In UAI '00: Proceedings of the 16th Conference in Uncertainty in Artificial Intelligence, Stanford University, Stanford, California, USA, June 30 - July 3, 2000, pages 32–37, 2000.
  2. Athey S, Imbens GW. 2017a. The econometrics of randomized experiments. In Handbook of Economic Field Experiments, Vol. 1, ed. E Duflo, A Banerjee, pp. 73–140. Amsterdam: Elsevier
  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. P. Artzner, F. Delbaen, J. Eber, and D. Heath. Coherent measures of risk. Journal of Mathematical Finance, 9(3):203–228, 1999
  5. M. L. Littman. Friend-or-foe q-learning in general-sum games. In Proceedings of the Eighteenth International Conference on Machine Learning (ICML 2001), Williams College, Williamstown, MA, USA, June 28 - July 1, 2001, pages 322–328, 2001
  6. J. Baxter and P. Bartlett. Infinite-horizon policy-gradient estimation. Journal of Artificial Intelligence Re- search, 15:319–350, 2001.
  7. Athey S, Mobius MM, Pál J. 2017c. The impact of aggregators on internet news consumption. Unpublished manuscript, Grad. School Bus., Stanford Univ., Stanford, CA
Frequently Asked QuestionsQ: What is the prediction methodology for GOOGL stock?
A: GOOGL stock prediction methodology: We evaluate the prediction models Supervised Machine Learning (ML) and Stepwise Regression
Q: Is GOOGL stock a buy or sell?
A: The dominant strategy among neural network is to Hold GOOGL Stock.
Q: Is Alphabet (Class A) stock a good investment?
A: The consensus rating for Alphabet (Class A) is Hold and assigned short-term Baa2 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of GOOGL stock?
A: The consensus rating for GOOGL is Hold.
Q: What is the prediction period for GOOGL stock?
A: The prediction period for GOOGL is (n+6 month)

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