Hang Seng Index assigned short-term Ba3 & long-term B1 forecasted stock rating.

Accurate stock market prediction is of great interest to investors; however, stock markets are driven by volatile factors such as microblogs and news that make it hard to predict stock market index based on merely the historical data. The enormous stock market volatility emphasizes the need to effectively assess the role of external factors in stock prediction. Stock markets can be predicted using machine learning algorithms on information contained in social media and financial news, as this data can change investors' behavior. We evaluate Hang Seng Index prediction models with Statistical Inference (ML) and Logistic Regression1,2,3,4 and conclude that the Hang Seng Index 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 Sell Hang Seng Index stock.


Keywords: Hang Seng Index, Hang Seng Index, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. Reaction Function
  2. Nash Equilibria
  3. Should I buy stocks now or wait amid such uncertainty?

Hang Seng Index Target Price Prediction Modeling Methodology

In this paper a Bayesian regularized artificial neural network is proposed as a novel method to forecast financial market behavior. Daily market prices and financial technical indicators are utilized as inputs to predict the one day future closing price of individual stocks. The prediction of stock price movement is generally considered to be a challenging and important task for financial time series analysis. We consider Hang Seng Index Stock Decision Process with Logistic Regression where A is the set of discrete actions of Hang Seng Index 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(Logistic 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(Statistical Inference (ML)) X S(n):→ (n+1 year) e x rx

n:Time series to forecast

p:Price signals of Hang Seng Index stock

j:Nash equilibria

k:Dominated move

a:Best response for target price

 

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How do AC Investment Research machine learning (predictive) algorithms actually work?

Hang Seng Index Stock Forecast (Buy or Sell) for (n+1 year)


Sample Set: Neural Network
Stock/Index: Hang Seng Index Hang Seng Index
Time series to forecast n: 12 Nov 2022 for (n+1 year)

According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Sell Hang Seng Index 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 Hang Seng Index

  1. IFRS 7 defines credit risk as 'the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation'. The requirement in paragraph 5.7.7(a) relates to the risk that the issuer will fail to perform on that particular liability. It does not necessarily relate to the creditworthiness of the issuer. For example, if an entity issues a collateralised liability and a non-collateralised liability that are otherwise identical, the credit risk of those two liabilities will be different, even though they are issued by the same entity. The credit risk on the collateralised liability will be less than the credit risk of the non-collateralised liability. The credit risk for a collateralised liability may be close to zero.
  2. If, at the date of initial application, it is impracticable (as defined in IAS 8) for an entity to assess whether the fair value of a prepayment feature was insignificant in accordance with paragraph B4.1.12(c) on the basis of the facts and circumstances that existed at the initial recognition of the financial asset, an entity shall assess the contractual cash flow characteristics of that financial asset on the basis of the facts and circumstances that existed at the initial recognition of the financial asset without taking into account the exception for prepayment features in paragraph B4.1.12. (See also paragraph 42S of IFRS 7.)
  3. Hedge effectiveness is the extent to which changes in the fair value or the cash flows of the hedging instrument offset changes in the fair value or the cash flows of the hedged item (for example, when the hedged item is a risk component, the relevant change in fair value or cash flows of an item is the one that is attributable to the hedged risk). Hedge ineffectiveness is the extent to which the changes in the fair value or the cash flows of the hedging instrument are greater or less than those on the hedged item.
  4. Expected credit losses reflect an entity's own expectations of credit losses. However, when considering all reasonable and supportable information that is available without undue cost or effort in estimating expected credit losses, an entity should also consider observable market information about the credit risk of the particular financial instrument or similar financial instruments.

*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

Hang Seng Index assigned short-term Ba3 & long-term B1 forecasted stock rating. We evaluate the prediction models Statistical Inference (ML) with Logistic Regression1,2,3,4 and conclude that the Hang Seng Index 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 Sell Hang Seng Index stock.

Financial State Forecast for Hang Seng Index Hang Seng Index Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba3B1
Operational Risk 4339
Market Risk4172
Technical Analysis8480
Fundamental Analysis7673
Risk Unsystematic8337

Prediction Confidence Score

Trust metric by Neural Network: 92 out of 100 with 849 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. K. Boda and J. Filar. Time consistent dynamic risk measures. Mathematical Methods of Operations Research, 63(1):169–186, 2006
  3. S. Bhatnagar, H. Prasad, and L. Prashanth. Stochastic recursive algorithms for optimization, volume 434. Springer, 2013
  4. Miller A. 2002. Subset Selection in Regression. New York: CRC Press
  5. Athey S, Bayati M, Doudchenko N, Imbens G, Khosravi K. 2017a. Matrix completion methods for causal panel data models. arXiv:1710.10251 [math.ST]
  6. 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.
  7. Banerjee, A., J. J. Dolado, J. W. Galbraith, D. F. Hendry (1993), Co-integration, Error-correction, and the Econometric Analysis of Non-stationary Data. Oxford: Oxford University Press.
Frequently Asked QuestionsQ: What is the prediction methodology for Hang Seng Index stock?
A: Hang Seng Index stock prediction methodology: We evaluate the prediction models Statistical Inference (ML) and Logistic Regression
Q: Is Hang Seng Index stock a buy or sell?
A: The dominant strategy among neural network is to Sell Hang Seng Index Stock.
Q: Is Hang Seng Index stock a good investment?
A: The consensus rating for Hang Seng Index is Sell and assigned short-term Ba3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of Hang Seng Index stock?
A: The consensus rating for Hang Seng Index is Sell.
Q: What is the prediction period for Hang Seng Index stock?
A: The prediction period for Hang Seng Index is (n+1 year)

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