Modelling A.I. in Economics

NSC Target Price Prediction (Forecast)

With the advent of machine learning, numerous approaches have been proposed to forecast stock prices. Various models have been developed to date such as Recurrent Neural Networks, Long Short-Term Memory, Convolutional Neural Network sliding window, etc., but were not accurate enough. Here, the aim is to predict the price of a stock and compare the results obtained using three major algorithms namely Kalman filters, XGBoost and ARIMA. We evaluate Norfolk Southern prediction models with Multi-Task Learning (ML) and Logistic Regression1,2,3,4 and conclude that the NSC 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 NSC stock.


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

Key Points

  1. How do you pick a stock?
  2. What is a prediction confidence?
  3. Why do we need predictive models?

NSC 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 Norfolk Southern Stock Decision Process with Logistic Regression where A is the set of discrete actions of NSC 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(Logistic 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-Task Learning (ML)) X S(n):→ (n+6 month) r s rs

n:Time series to forecast

p:Price signals of NSC 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?

NSC Stock Forecast (Buy or Sell) for (n+6 month)


Sample Set: Neural Network
Stock/Index: NSC Norfolk Southern
Time series to forecast n: 09 Nov 2022 for (n+6 month)

According to price forecasts for (n+6 month) period: The dominant strategy among neural network is to Hold NSC 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 Norfolk Southern

  1. If an entity originates a loan that bears an off-market interest rate (eg 5 per cent when the market rate for similar loans is 8 per cent), and receives an upfront fee as compensation, the entity recognises the loan at its fair value, ie net of the fee it receives.
  2. In accordance with the hedge effectiveness requirements, the hedge ratio of the hedging relationship must be the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item. Hence, if an entity hedges less than 100 per cent of the exposure on an item, such as 85 per cent, it shall designate the hedging relationship using a hedge ratio that is the same as that resulting from 85 per cent of the exposure and the quantity of the hedging instrument that the entity actually uses to hedge those 85 per cent. Similarly, if, for example, an entity hedges an exposure using a nominal amount of 40 units of a financial instrument, it shall designate the hedging relationship using a hedge ratio that is the same as that resulting from that quantity of 40 units (ie the entity must not use a hedge ratio based on a higher quantity of units that it might hold in total or a lower quantity of units) and the quantity of the hedged item that it actually hedges with those 40 units.
  3. An entity must look through until it can identify the underlying pool of instruments that are creating (instead of passing through) the cash flows. This is the underlying pool of financial instruments.
  4. For the purpose of applying paragraph 6.5.11, at the point when an entity amends the description of a hedged item as required in paragraph 6.9.1(b), the amount accumulated in the cash flow hedge reserve shall be deemed to be based on the alternative benchmark rate on which the hedged future cash flows are determined.

*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

Norfolk Southern assigned short-term Baa2 & long-term B1 forecasted stock rating. We evaluate the prediction models Multi-Task Learning (ML) with Logistic Regression1,2,3,4 and conclude that the NSC 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 NSC stock.

Financial State Forecast for NSC Norfolk Southern Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Baa2B1
Operational Risk 7534
Market Risk8180
Technical Analysis7659
Fundamental Analysis8934
Risk Unsystematic6174

Prediction Confidence Score

Trust metric by Neural Network: 86 out of 100 with 620 signals.

References

  1. P. Artzner, F. Delbaen, J. Eber, and D. Heath. Coherent measures of risk. Journal of Mathematical Finance, 9(3):203–228, 1999
  2. Chernozhukov V, Escanciano JC, Ichimura H, Newey WK. 2016b. Locally robust semiparametric estimation. arXiv:1608.00033 [math.ST]
  3. Krizhevsky A, Sutskever I, Hinton GE. 2012. Imagenet classification with deep convolutional neural networks. In Advances in Neural Information Processing Systems, Vol. 25, ed. Z Ghahramani, M Welling, C Cortes, ND Lawrence, KQ Weinberger, pp. 1097–105. San Diego, CA: Neural Inf. Process. Syst. Found.
  4. Knox SW. 2018. Machine Learning: A Concise Introduction. Hoboken, NJ: Wiley
  5. Barrett, C. B. (1997), "Heteroscedastic price forecasting for food security management in developing countries," Oxford Development Studies, 25, 225–236.
  6. R. Rockafellar and S. Uryasev. Optimization of conditional value-at-risk. Journal of Risk, 2:21–42, 2000.
  7. Dietterich TG. 2000. Ensemble methods in machine learning. In Multiple Classifier Systems: First International Workshop, Cagliari, Italy, June 21–23, pp. 1–15. Berlin: Springer
Frequently Asked QuestionsQ: What is the prediction methodology for NSC stock?
A: NSC stock prediction methodology: We evaluate the prediction models Multi-Task Learning (ML) and Logistic Regression
Q: Is NSC stock a buy or sell?
A: The dominant strategy among neural network is to Hold NSC Stock.
Q: Is Norfolk Southern stock a good investment?
A: The consensus rating for Norfolk Southern is Hold and assigned short-term Baa2 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of NSC stock?
A: The consensus rating for NSC is Hold.
Q: What is the prediction period for NSC stock?
A: The prediction period for NSC is (n+6 month)

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