Does algo trading work? (HOG Stock Forecast)

This paper addresses problem of predicting direction of movement of stock and stock price index. The study compares four prediction models, Artificial Neural Network (ANN), Support Vector Machine (SVM), random forest and naive-Bayes with two approaches for input to these models. We evaluate Harley-Davidson prediction models with Transductive Learning (ML) and Statistical Hypothesis Testing^1,2,3,4 and conclude that the HOG 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 HOG stock.

Keywords: HOG, Harley-Davidson, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

1. What are main components of Markov decision process?
2. Technical Analysis with Algorithmic Trading
3. Prediction Modeling

HOG Target Price Prediction Modeling Methodology

Predicting the future price of financial assets has always been an important research topic in the field of quantitative finance. This paper attempts to use the latest artificial intelligence technologies to design and implement a framework for financial asset price prediction. We consider Harley-Davidson Stock Decision Process with Statistical Hypothesis Testing where A is the set of discrete actions of HOG 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(Statistical Hypothesis Testing)^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(Transductive 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 HOG 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?

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

Sample Set: Neural Network
Stock/Index: HOG Harley-Davidson
Time series to forecast n: 15 Nov 2022 for (n+8 weeks)

According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Hold HOG 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 Harley-Davidson

1. If changes are made in addition to those changes required by interest rate benchmark reform to the financial asset or financial liability designated in a hedging relationship (as described in paragraphs 5.4.6–5.4.8) or to the designation of the hedging relationship (as required by paragraph 6.9.1), an entity shall first apply the applicable requirements in this Standard to determine if those additional changes result in the discontinuation of hedge accounting. If the additional changes do not result in the discontinuation of hedge accounting, an entity shall amend the formal designation of the hedging relationship as specified in paragraph 6.9.1.
2. If an entity prepares interim financial reports in accordance with IAS 34 Interim Financial Reporting the entity need not apply the requirements in this Standard to interim periods prior to the date of initial application if it is impracticable (as defined in IAS 8).
3. Paragraph 6.3.6 states that in consolidated financial statements the foreign currency risk of a highly probable forecast intragroup transaction may qualify as a hedged item in a cash flow hedge, provided that the transaction is denominated in a currency other than the functional currency of the entity entering into that transaction and that the foreign currency risk will affect consolidated profit or loss. For this purpose an entity can be a parent, subsidiary, associate, joint arrangement or branch. If the foreign currency risk of a forecast intragroup transaction does not affect consolidated profit or loss, the intragroup transaction cannot qualify as a hedged item. This is usually the case for royalty payments, interest payments or management charges between members of the same group, unless there is a related external transaction. However, when the foreign currency risk of a forecast intragroup transaction will affect consolidated profit or loss, the intragroup transaction can qualify as a hedged item. An example is forecast sales or purchases of inventories between members of the same group if there is an onward sale of the inventory to a party external to the group. Similarly, a forecast intragroup sale of plant and equipment from the group entity that manufactured it to a group entity that will use the plant and equipment in its operations may affect consolidated profit or loss. This could occur, for example, because the plant and equipment will be depreciated by the purchasing entity and the amount initially recognised for the plant and equipment may change if the forecast intragroup transaction is denominated in a currency other than the functional currency of the purchasing entity.
4. Paragraph 4.1.1(b) requires an entity to classify a financial asset on the basis of its contractual cash flow characteristics if the financial asset is held within a business model whose objective is to hold assets to collect contractual cash flows or within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, unless paragraph 4.1.5 applies. To do so, the condition in paragraphs 4.1.2(b) and 4.1.2A(b) requires an entity to determine whether the asset's contractual cash flows are solely payments of principal and interest on the principal amount outstanding.

*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

Harley-Davidson assigned short-term B3 & long-term B1 forecasted stock rating. We evaluate the prediction models Transductive Learning (ML) with Statistical Hypothesis Testing^1,2,3,4 and conclude that the HOG 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 HOG stock.

Financial State Forecast for HOG Harley-Davidson Stock Options & Futures

Rating	Short-Term	Long-Term Senior
Outlook*	B3	B1
Operational Risk	43	90
Market Risk	53	55
Technical Analysis	62	41
Fundamental Analysis	46	44
Risk Unsystematic	37	52

Prediction Confidence Score

Trust metric by Neural Network: 79 out of 100 with 625 signals.

References

1. Chernozhukov V, Demirer M, Duflo E, Fernandez-Val I. 2018b. Generic machine learning inference on heteroge- nous treatment effects in randomized experiments. NBER Work. Pap. 24678
2. Bai J, Ng S. 2017. Principal components and regularized estimation of factor models. arXiv:1708.08137 [stat.ME]
3. Mullainathan S, Spiess J. 2017. Machine learning: an applied econometric approach. J. Econ. Perspect. 31:87–106
4. Matzkin RL. 1994. Restrictions of economic theory in nonparametric methods. In Handbook of Econometrics, Vol. 4, ed. R Engle, D McFadden, pp. 2523–58. Amsterdam: Elsevier
5. Clements, M. P. D. F. Hendry (1995), "Forecasting in cointegrated systems," Journal of Applied Econometrics, 10, 127–146.
6. J. Baxter and P. Bartlett. Infinite-horizon policy-gradient estimation. Journal of Artificial Intelligence Re- search, 15:319–350, 2001.
7. Candès EJ, Recht B. 2009. Exact matrix completion via convex optimization. Found. Comput. Math. 9:717

Frequently Asked Questions

Q: What is the prediction methodology for HOG stock?
A: HOG stock prediction methodology: We evaluate the prediction models Transductive Learning (ML) and Statistical Hypothesis Testing
Q: Is HOG stock a buy or sell?
A: The dominant strategy among neural network is to Hold HOG Stock.
Q: Is Harley-Davidson stock a good investment?
A: The consensus rating for Harley-Davidson is Hold and assigned short-term B3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of HOG stock?
A: The consensus rating for HOG is Hold.
Q: What is the prediction period for HOG stock?
A: The prediction period for HOG is (n+8 weeks)

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