Modelling A.I. in Economics

How accurate is machine learning in stock market? (PM Stock Forecast) (Forecast)

Stock market or Share market is one of the most complicated and sophisticated way to do business. Small ownerships, brokerage corporations, banking sector, all depend on this very body to make revenue and divide risks; a very complicated model. However, this paper proposes to use machine learning algorithm to predict the future stock price for exchange by using open source libraries and preexisting algorithms to help make this unpredictable format of business a little more predictable. We evaluate Philip Morris International prediction models with Modular Neural Network (CNN Layer) and Sign Test1,2,3,4 and conclude that the PM stock is predictable in the short/long term. According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Hold PM stock.


Keywords: PM, Philip Morris International, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. Can stock prices be predicted?
  2. Market Outlook
  3. What is a prediction confidence?

PM Target Price Prediction Modeling Methodology

Stock market is considered chaotic, complex, volatile and dynamic. Undoubtedly, its prediction is one of the most challenging tasks in time series forecasting. Moreover existing Artificial Neural Network (ANN) approaches fail to provide encouraging results. Meanwhile advances in machine learning have presented favourable results for speech recognition, image classification and language processing. We consider Philip Morris International Stock Decision Process with Sign Test where A is the set of discrete actions of PM 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(Sign Test)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 (CNN Layer)) X S(n):→ (n+3 month) r s rs

n:Time series to forecast

p:Price signals of PM 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?

PM Stock Forecast (Buy or Sell) for (n+3 month)


Sample Set: Neural Network
Stock/Index: PM Philip Morris International
Time series to forecast n: 02 Nov 2022 for (n+3 month)

According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Hold PM 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 Philip Morris International

  1. For the purposes of measuring expected credit losses, the estimate of expected cash shortfalls shall reflect the cash flows expected from collateral and other credit enhancements that are part of the contractual terms and are not recognised separately by the entity. The estimate of expected cash shortfalls on a collateralised financial instrument reflects the amount and timing of cash flows that are expected from foreclosure on the collateral less the costs of obtaining and selling the collateral, irrespective of whether foreclosure is probable (ie the estimate of expected cash flows considers the probability of a foreclosure and the cash flows that would result from it). Consequently, any cash flows that are expected from the realisation of the collateral beyond the contractual maturity of the contract should be included in this analysis. Any collateral obtained as a result of foreclosure is not recognised as an asset that is separate from the collateralised financial instrument unless it meets the relevant recognition criteria for an asset in this or other Standards.
  2. An entity is not required to restate prior periods to reflect the application of these amendments. The entity may restate prior periods if, and only if, it is possible without the use of hindsight and the restated financial statements reflect all the requirements in this Standard. If an entity does not restate prior periods, the entity shall recognise any difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period that includes the date of initial application of these amendments in the opening retained earnings (or other component of equity, as appropriate) of the annual reporting period that includes the date of initial application of these amendments.
  3. If items are hedged together as a group in a cash flow hedge, they might affect different line items in the statement of profit or loss and other comprehensive income. The presentation of hedging gains or losses in that statement depends on the group of items
  4. For some types of fair value hedges, the objective of the hedge is not primarily to offset the fair value change of the hedged item but instead to transform the cash flows of the hedged item. For example, an entity hedges the fair value interest rate risk of a fixed-rate debt instrument using an interest rate swap. The entity's hedge objective is to transform the fixed-interest cash flows into floating interest cash flows. This objective is reflected in the accounting for the hedging relationship by accruing the net interest accrual on the interest rate swap in profit or loss. In the case of a hedge of a net position (for example, a net position of a fixed-rate asset and a fixed-rate liability), this net interest accrual must be presented in a separate line item in the statement of profit or loss and other comprehensive income. This is to avoid the grossing up of a single instrument's net gains or losses into offsetting gross amounts and recognising them in different line items (for example, this avoids grossing up a net interest receipt on a single interest rate swap into gross interest revenue and gross interest expense).

*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

Philip Morris International assigned short-term Ba2 & long-term Ba1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (CNN Layer) with Sign Test1,2,3,4 and conclude that the PM stock is predictable in the short/long term. According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Hold PM stock.

Financial State Forecast for PM Philip Morris International Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba2Ba1
Operational Risk 8568
Market Risk9060
Technical Analysis4068
Fundamental Analysis8761
Risk Unsystematic4690

Prediction Confidence Score

Trust metric by Neural Network: 88 out of 100 with 862 signals.

References

  1. J. Filar, L. Kallenberg, and H. Lee. Variance-penalized Markov decision processes. Mathematics of Opera- tions Research, 14(1):147–161, 1989
  2. E. Altman. Constrained Markov decision processes, volume 7. CRC Press, 1999
  3. Mnih A, Teh YW. 2012. A fast and simple algorithm for training neural probabilistic language models. In Proceedings of the 29th International Conference on Machine Learning, pp. 419–26. La Jolla, CA: Int. Mach. Learn. Soc.
  4. Athey S, Wager S. 2017. Efficient policy learning. arXiv:1702.02896 [math.ST]
  5. R. Rockafellar and S. Uryasev. Conditional value-at-risk for general loss distributions. Journal of Banking and Finance, 26(7):1443 – 1471, 2002
  6. N. B ̈auerle and A. Mundt. Dynamic mean-risk optimization in a binomial model. Mathematical Methods of Operations Research, 70(2):219–239, 2009.
  7. Meinshausen N. 2007. Relaxed lasso. Comput. Stat. Data Anal. 52:374–93
Frequently Asked QuestionsQ: What is the prediction methodology for PM stock?
A: PM stock prediction methodology: We evaluate the prediction models Modular Neural Network (CNN Layer) and Sign Test
Q: Is PM stock a buy or sell?
A: The dominant strategy among neural network is to Hold PM Stock.
Q: Is Philip Morris International stock a good investment?
A: The consensus rating for Philip Morris International is Hold and assigned short-term Ba2 & long-term Ba1 forecasted stock rating.
Q: What is the consensus rating of PM stock?
A: The consensus rating for PM is Hold.
Q: What is the prediction period for PM stock?
A: The prediction period for PM is (n+3 month)

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