Modelling A.I. in Economics

How Is Machine Learning Used in Trading? (OMC Stock Forecast) (Forecast)

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 Omnicom prediction models with Transfer Learning (ML) and Spearman Correlation1,2,3,4 and conclude that the OMC 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 OMC stock.


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

Key Points

  1. Can we predict stock market using machine learning?
  2. Investment Risk
  3. Technical Analysis with Algorithmic Trading

OMC Target Price Prediction Modeling Methodology

In today's economy, there is a profound impact of the stock market or equity market. Prediction of stock prices is extremely complex, chaotic, and the presence of a dynamic environment makes it a great challenge. Behavioural finance suggests that decision-making process of investors is to a very great extent influenced by the emotions and sentiments in response to a particular news. Thus, to support the decisions of the investors, we have presented an approach combining two distinct fields for analysis of stock exchange. We consider Omnicom Stock Decision Process with Spearman Correlation where A is the set of discrete actions of OMC 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(Spearman Correlation)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(Transfer Learning (ML)) X S(n):→ (n+8 weeks) i = 1 n r i

n:Time series to forecast

p:Price signals of OMC 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?

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

Sample Set: Neural Network
Stock/Index: OMC Omnicom
Time series to forecast n: 16 Nov 2022 for (n+8 weeks)

According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Hold OMC 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 Omnicom

  1. For the purpose of recognising foreign exchange gains and losses under IAS 21, a financial asset measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A is treated as a monetary item. Accordingly, such a financial asset is treated as an asset measured at amortised cost in the foreign currency. Exchange differences on the amortised cost are recognised in profit or loss and other changes in the carrying amount are recognised in accordance with paragraph 5.7.10.
  2. An entity applies IAS 21 to financial assets and financial liabilities that are monetary items in accordance with IAS 21 and denominated in a foreign currency. IAS 21 requires any foreign exchange gains and losses on monetary assets and monetary liabilities to be recognised in profit or loss. An exception is a monetary item that is designated as a hedging instrument in a cash flow hedge (see paragraph 6.5.11), a hedge of a net investment (see paragraph 6.5.13) or a fair value hedge of an equity instrument for which an entity has elected to present changes in fair value in other comprehensive income in accordance with paragraph 5.7.5 (see paragraph 6.5.8).
  3. In some cases, the qualitative and non-statistical quantitative information available may be sufficient to determine that a financial instrument has met the criterion for the recognition of a loss allowance at an amount equal to lifetime expected credit losses. That is, the information does not need to flow through a statistical model or credit ratings process in order to determine whether there has been a significant increase in the credit risk of the financial instrument. In other cases, an entity may need to consider other information, including information from its statistical models or credit ratings processes.
  4. Changes in market conditions that give rise to market risk include changes in a benchmark interest rate, the price of another entity's financial instrument, a commodity price, a foreign exchange rate or an index of prices or rates.

*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

Omnicom assigned short-term Ba2 & long-term B3 forecasted stock rating. We evaluate the prediction models Transfer Learning (ML) with Spearman Correlation1,2,3,4 and conclude that the OMC 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 OMC stock.

Financial State Forecast for OMC Omnicom Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba2B3
Operational Risk 8747
Market Risk3365
Technical Analysis8731
Fundamental Analysis8057
Risk Unsystematic5441

Prediction Confidence Score

Trust metric by Neural Network: 88 out of 100 with 620 signals.

References

  1. Chernozhukov V, Chetverikov D, Demirer M, Duflo E, Hansen C, et al. 2016a. Double machine learning for treatment and causal parameters. Tech. Rep., Cent. Microdata Methods Pract., Inst. Fiscal Stud., London
  2. Keane MP. 2013. Panel data discrete choice models of consumer demand. In The Oxford Handbook of Panel Data, ed. BH Baltagi, pp. 54–102. Oxford, UK: Oxford Univ. Press
  3. Blei DM, Lafferty JD. 2009. Topic models. In Text Mining: Classification, Clustering, and Applications, ed. A Srivastava, M Sahami, pp. 101–24. Boca Raton, FL: CRC Press
  4. R. Sutton and A. Barto. Introduction to reinforcement learning. MIT Press, 1998
  5. Harris ZS. 1954. Distributional structure. Word 10:146–62
  6. Tibshirani R, Hastie T. 1987. Local likelihood estimation. J. Am. Stat. Assoc. 82:559–67
  7. 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.
Frequently Asked QuestionsQ: What is the prediction methodology for OMC stock?
A: OMC stock prediction methodology: We evaluate the prediction models Transfer Learning (ML) and Spearman Correlation
Q: Is OMC stock a buy or sell?
A: The dominant strategy among neural network is to Hold OMC Stock.
Q: Is Omnicom stock a good investment?
A: The consensus rating for Omnicom is Hold and assigned short-term Ba2 & long-term B3 forecasted stock rating.
Q: What is the consensus rating of OMC stock?
A: The consensus rating for OMC is Hold.
Q: What is the prediction period for OMC stock?
A: The prediction period for OMC is (n+8 weeks)

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