Modelling A.I. in Economics

LON:III 3I GROUP PLC

3I GROUP PLC Research Report

Summary

Accurate prediction of stock market returns is a very challenging task due to volatile and non-linear nature of the financial stock markets. With the introduction of artificial intelligence and increased computational capabilities, programmed methods of prediction have proved to be more efficient in predicting stock prices. We evaluate 3I GROUP PLC prediction models with Multi-Instance Learning (ML) and Multiple Regression1,2,3,4 and conclude that the LON:III stock is predictable in the short/long term. According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Hold LON:III stock.

Key Points

  1. Can we predict stock market using machine learning?
  2. What is prediction model?
  3. Is Target price a good indicator?

LON:III Target Price Prediction Modeling Methodology

We consider 3I GROUP PLC Decision Process with Multi-Instance Learning (ML) where A is the set of discrete actions of LON:III 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(Multiple 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(Multi-Instance Learning (ML)) X S(n):→ (n+6 month) R = r 1 r 2 r 3

n:Time series to forecast

p:Price signals of LON:III stock

j:Nash equilibria (Neural Network)

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?

LON:III Stock Forecast (Buy or Sell) for (n+6 month)

Sample Set: Neural Network
Stock/Index: LON:III 3I GROUP PLC
Time series to forecast n: 29 Nov 2022 for (n+6 month)

According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Hold LON:III 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 3I GROUP PLC

  1. If a collar, in the form of a purchased call and written put, prevents a transferred asset from being derecognised and the entity measures the asset at fair value, it continues to measure the asset at fair value. The associated liability is measured at (i) the sum of the call exercise price and fair value of the put option less the time value of the call option, if the call option is in or at the money, or (ii) the sum of the fair value of the asset and the fair value of the put option less the time value of the call option if the call option is out of the money. The adjustment to the associated liability ensures that the net carrying amount of the asset and the associated liability is the fair value of the options held and written by the entity. For example, assume an entity transfers a financial asset that is measured at fair value while simultaneously purchasing a call with an exercise price of CU120 and writing a put with an exercise price of CU80. Assume also that the fair value of the asset is CU100 at the date of the transfer. The time value of the put and call are CU1 and CU5 respectively. In this case, the entity recognises an asset of CU100 (the fair value of the asset) and a liability of CU96 [(CU100 + CU1) – CU5]. This gives a net asset value of CU4, which is the fair value of the options held and written by the entity.
  2. That the transferee is unlikely to sell the transferred asset does not, of itself, mean that the transferor has retained control of the transferred asset. However, if a put option or guarantee constrains the transferee from selling the transferred asset, then the transferor has retained control of the transferred asset. For example, if a put option or guarantee is sufficiently valuable it constrains the transferee from selling the transferred asset because the transferee would, in practice, not sell the transferred asset to a third party without attaching a similar option or other restrictive conditions. Instead, the transferee would hold the transferred asset so as to obtain payments under the guarantee or put option. Under these circumstances the transferor has retained control of the transferred asset.
  3. If an entity previously accounted at cost (in accordance with IAS 39), for an investment in an equity instrument that does not have a quoted price in an active market for an identical instrument (ie a Level 1 input) (or for a derivative asset that is linked to and must be settled by delivery of such an equity instrument) it shall measure that instrument 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 (or other component of equity, as appropriate) of the reporting period that includes the date of initial application.
  4. Despite the requirement in paragraph 7.2.1, an entity that adopts the classification and measurement requirements of this Standard (which include the requirements related to amortised cost measurement for financial assets and impairment in Sections 5.4 and 5.5) shall provide the disclosures set out in paragraphs 42L–42O of IFRS 7 but need not restate prior periods. The entity may restate prior periods if, and only if, it is possible without the use of hindsight. 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 in the opening retained earnings (or other component of equity, as appropriate) of the annual reporting period that includes the date of initial application. However, if an entity restates prior periods, the restated financial statements must reflect all of the requirements in this Standard. If an entity's chosen approach to applying IFRS 9 results in more than one date of initial application for different requirements, this paragraph applies at each date of initial application (see paragraph 7.2.2). This would be the case, for example, if an entity elects to early apply only the requirements for the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss in accordance with paragraph 7.1.2 before applying the other requirements in this Standard.

*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

3I GROUP PLC assigned short-term B1 & long-term B2 forecasted stock rating. We evaluate the prediction models Multi-Instance Learning (ML) with Multiple Regression1,2,3,4 and conclude that the LON:III stock is predictable in the short/long term. According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Hold LON:III stock.

Financial State Forecast for LON:III 3I GROUP PLC Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B1B2
Operational Risk 7867
Market Risk6633
Technical Analysis4843
Fundamental Analysis7063
Risk Unsystematic4967

Prediction Confidence Score

Trust metric by Neural Network: 77 out of 100 with 840 signals.

References

  1. 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.
  2. Bai J, Ng S. 2002. Determining the number of factors in approximate factor models. Econometrica 70:191–221
  3. Kallus N. 2017. Balanced policy evaluation and learning. arXiv:1705.07384 [stat.ML]
  4. Greene WH. 2000. Econometric Analysis. Upper Saddle River, N J: Prentice Hall. 4th ed.
  5. N. B ̈auerle and A. Mundt. Dynamic mean-risk optimization in a binomial model. Mathematical Methods of Operations Research, 70(2):219–239, 2009.
  6. Breiman L. 1993. Better subset selection using the non-negative garotte. Tech. Rep., Univ. Calif., Berkeley
  7. Clements, M. P. D. F. Hendry (1996), "Intercept corrections and structural change," Journal of Applied Econometrics, 11, 475–494.
Frequently Asked QuestionsQ: What is the prediction methodology for LON:III stock?
A: LON:III stock prediction methodology: We evaluate the prediction models Multi-Instance Learning (ML) and Multiple Regression
Q: Is LON:III stock a buy or sell?
A: The dominant strategy among neural network is to Hold LON:III Stock.
Q: Is 3I GROUP PLC stock a good investment?
A: The consensus rating for 3I GROUP PLC is Hold and assigned short-term B1 & long-term B2 forecasted stock rating.
Q: What is the consensus rating of LON:III stock?
A: The consensus rating for LON:III is Hold.
Q: What is the prediction period for LON:III stock?
A: The prediction period for LON:III is (n+6 month)

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