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

The presented paper modeled and predicted stock returns using LSTM. The historical data of stock market were transformed into 30-days-long sequences with 10 learning features and 7-day earning rate labeling. The model was fitted by training on 1200000 sequences and tested using the other 350000 sequences. We evaluate Severn Trent prediction models with Modular Neural Network (Financial Sentiment Analysis) and Linear Regression^1,2,3,4 and conclude that the SVT 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 SVT stock.

Keywords: SVT, Severn Trent, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

1. What are the most successful trading algorithms?
2. Short/Long Term Stocks
3. What statistical methods are used to analyze data?

SVT Target Price Prediction Modeling Methodology

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 consider Severn Trent Stock Decision Process with Linear Regression where A is the set of discrete actions of SVT 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(Linear Regression)^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(Modular Neural Network (Financial Sentiment Analysis)) X S(n):→ (n+1 year) $\begin{array}{l}\int r^s\mathrm{rs}\end{array}$

n:Time series to forecast

p:Price signals of SVT 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?

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

Sample Set: Neural Network
Stock/Index: SVT Severn Trent
Time series to forecast n: 16 Nov 2022 for (n+1 year)

According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Hold SVT 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 Severn Trent

1. If, at the date of initial application, it is impracticable (as defined in IAS 8) for an entity to assess a modified time value of money element in accordance with paragraphs B4.1.9B–B4.1.9D 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 requirements related to the modification of the time value of money element in paragraphs B4.1.9B–B4.1.9D. (See also paragraph 42R of IFRS 7.)
2. For the purposes of applying the requirement in paragraph 5.7.7(a), credit risk is different from asset-specific performance risk. Asset-specific performance risk is not related to the risk that an entity will fail to discharge a particular obligation but instead it is related to the risk that a single asset or a group of assets will perform poorly (or not at all).
3. An entity's business model is determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. The entity's business model does not depend on management's intentions for an individual instrument. Accordingly, this condition is not an instrument-by-instrument approach to classification and should be determined on a higher level of aggregation. However, a single entity may have more than one business model for managing its financial instruments. Consequently, classification need not be determined at the reporting entity level. For example, an entity may hold a portfolio of investments that it manages in order to collect contractual cash flows and another portfolio of investments that it manages in order to trade to realise fair value changes. Similarly, in some circumstances, it may be appropriate to separate a portfolio of financial assets into subportfolios in order to reflect the level at which an entity manages those financial assets. For example, that may be the case if an entity originates or purchases a portfolio of mortgage loans and manages some of the loans with an objective of collecting contractual cash flows and manages the other loans with an objective of selling them.
4. The fact that a derivative is in or out of the money when it is designated as a hedging instrument does not in itself mean that a qualitative assessment is inappropriate. It depends on the circumstances whether hedge ineffectiveness arising from that fact could have a magnitude that a qualitative assessment would not adequately capture.

*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

Severn Trent assigned short-term Ba3 & long-term B1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Financial Sentiment Analysis) with Linear Regression^1,2,3,4 and conclude that the SVT 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 SVT stock.

Financial State Forecast for SVT Severn Trent Stock Options & Futures

Rating	Short-Term	Long-Term Senior
Outlook*	Ba3	B1
Operational Risk	39	66
Market Risk	82	38
Technical Analysis	53	64
Fundamental Analysis	63	67
Risk Unsystematic	81	42

Prediction Confidence Score

Trust metric by Neural Network: 75 out of 100 with 613 signals.

References

1. Vapnik V. 2013. The Nature of Statistical Learning Theory. Berlin: Springer
2. Semenova V, Goldman M, Chernozhukov V, Taddy M. 2018. Orthogonal ML for demand estimation: high dimensional causal inference in dynamic panels. arXiv:1712.09988 [stat.ML]
3. Bessler, D. A. S. W. Fuller (1993), "Cointegration between U.S. wheat markets," Journal of Regional Science, 33, 481–501.
4. Efron B, Hastie T. 2016. Computer Age Statistical Inference, Vol. 5. Cambridge, UK: Cambridge Univ. Press
5. Barrett, C. B. (1997), "Heteroscedastic price forecasting for food security management in developing countries," Oxford Development Studies, 25, 225–236.
6. Wooldridge JM. 2010. Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press
7. Akgiray, V. (1989), "Conditional heteroscedasticity in time series of stock returns: Evidence and forecasts," Journal of Business, 62, 55–80.

Frequently Asked Questions

Q: What is the prediction methodology for SVT stock?
A: SVT stock prediction methodology: We evaluate the prediction models Modular Neural Network (Financial Sentiment Analysis) and Linear Regression
Q: Is SVT stock a buy or sell?
A: The dominant strategy among neural network is to Hold SVT Stock.
Q: Is Severn Trent stock a good investment?
A: The consensus rating for Severn Trent is Hold and assigned short-term Ba3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of SVT stock?
A: The consensus rating for SVT is Hold.
Q: What is the prediction period for SVT stock?
A: The prediction period for SVT is (n+1 year)

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