How do you determine buy or sell? (PFG Stock Forecast)

Principal Financial Group Research Report

Summary

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 evaluate Principal Financial Group prediction models with Modular Neural Network (Financial Sentiment Analysis) and ElasticNet Regression1,2,3,4 and conclude that the PFG 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 PFG stock.

Key Points

  1. Stock Rating
  2. Game Theory
  3. Trust metric by Neural Network

PFG Target Price Prediction Modeling Methodology

We consider Principal Financial Group Stock Decision Process with Modular Neural Network (Financial Sentiment Analysis) where A is the set of discrete actions of PFG 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(ElasticNet 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(Modular Neural Network (Financial Sentiment Analysis)) X S(n):→ (n+1 year) R = 1 0 0 0 1 0 0 0 1

n:Time series to forecast

p:Price signals of PFG stock

j:Nash equilibria (Neural Network)

k:Dominated move

a:Best response for target price

 

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

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

Sample Set: Neural Network
Stock/Index: PFG Principal Financial Group
Time series to forecast n: 18 Nov 2022 for (n+1 year)

According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Sell PFG 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 Principal Financial Group

  1. If an entity previously accounted for a derivative liability that is linked to, and must be settled by, delivery of an equity instrument that does not have a quoted price in an active market for an identical instrument (ie a Level 1 input) at cost in accordance with IAS 39, it shall measure that derivative liability at fair value at the date of initial application. Any difference between the previous carrying amount and the fair value shall be recognised in the opening retained earnings of the reporting period that includes the date of initial application.
  2. For example, an entity hedges an exposure to Foreign Currency A using a currency derivative that references Foreign Currency B and Foreign Currencies A and B are pegged (ie their exchange rate is maintained within a band or at an exchange rate set by a central bank or other authority). If the exchange rate between Foreign Currency A and Foreign Currency B were changed (ie a new band or rate was set), rebalancing the hedging relationship to reflect the new exchange rate would ensure that the hedging relationship would continue to meet the hedge effectiveness requirement for the hedge ratio in the new circumstances. In contrast, if there was a default on the currency derivative, changing the hedge ratio could not ensure that the hedging relationship would continue to meet that hedge effectiveness requirement. Hence, rebalancing does not facilitate the continuation of a hedging relationship in situations in which the relationship between the hedging instrument and the hedged item changes in a way that cannot be compensated for by adjusting the hedge ratio
  3. When an entity separates the foreign currency basis spread from a financial instrument and excludes it from the designation of that financial instrument as the hedging instrument (see paragraph 6.2.4(b)), the application guidance in paragraphs B6.5.34–B6.5.38 applies to the foreign currency basis spread in the same manner as it is applied to the forward element of a forward contract.
  4. Contractual cash flows that are solely payments of principal and interest on the principal amount outstanding are consistent with a basic lending arrangement. In a basic lending arrangement, consideration for the time value of money (see paragraphs B4.1.9A–B4.1.9E) and credit risk are typically the most significant elements of interest. However, in such an arrangement, interest can also include consideration for other basic lending risks (for example, liquidity risk) and costs (for example, administrative costs) associated with holding the financial asset for a particular period of time. In addition, interest can include a profit margin that is consistent with a basic lending arrangement. In extreme economic circumstances, interest can be negative if, for example, the holder of a financial asset either explicitly or implicitly pays for the deposit of its money for a particular period of time (and that fee exceeds the consideration that the holder receives for the time value of money, credit risk and other basic lending risks and costs).

*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

Principal Financial Group assigned short-term B1 & long-term Baa2 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Financial Sentiment Analysis) with ElasticNet Regression1,2,3,4 and conclude that the PFG 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 PFG stock.

Financial State Forecast for PFG Principal Financial Group Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B1Baa2
Operational Risk 3668
Market Risk7788
Technical Analysis5168
Fundamental Analysis5656
Risk Unsystematic7782

Prediction Confidence Score

Trust metric by Neural Network: 79 out of 100 with 638 signals.

References

  1. Ashley, R. (1983), "On the usefulness of macroeconomic forecasts as inputs to forecasting models," Journal of Forecasting, 2, 211–223.
  2. Bengio Y, Schwenk H, Senécal JS, Morin F, Gauvain JL. 2006. Neural probabilistic language models. In Innovations in Machine Learning: Theory and Applications, ed. DE Holmes, pp. 137–86. Berlin: Springer
  3. Efron B, Hastie T, Johnstone I, Tibshirani R. 2004. Least angle regression. Ann. Stat. 32:407–99
  4. Zeileis A, Hothorn T, Hornik K. 2008. Model-based recursive partitioning. J. Comput. Graph. Stat. 17:492–514 Zhou Z, Athey S, Wager S. 2018. Offline multi-action policy learning: generalization and optimization. arXiv:1810.04778 [stat.ML]
  5. LeCun Y, Bengio Y, Hinton G. 2015. Deep learning. Nature 521:436–44
  6. Clements, M. P. D. F. Hendry (1997), "An empirical study of seasonal unit roots in forecasting," International Journal of Forecasting, 13, 341–355.
  7. Athey S, Wager S. 2017. Efficient policy learning. arXiv:1702.02896 [math.ST]
Frequently Asked QuestionsQ: What is the prediction methodology for PFG stock?
A: PFG stock prediction methodology: We evaluate the prediction models Modular Neural Network (Financial Sentiment Analysis) and ElasticNet Regression
Q: Is PFG stock a buy or sell?
A: The dominant strategy among neural network is to Sell PFG Stock.
Q: Is Principal Financial Group stock a good investment?
A: The consensus rating for Principal Financial Group is Sell and assigned short-term B1 & long-term Baa2 forecasted stock rating.
Q: What is the consensus rating of PFG stock?
A: The consensus rating for PFG is Sell.
Q: What is the prediction period for PFG stock?
A: The prediction period for PFG is (n+1 year)

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