Modelling A.I. in Economics

Should I Buy Stocks Now or Wait Amid Such Uncertainty? (YUM Stock Prediction) (Forecast)

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 evaluate Yum! Brands prediction models with Reinforcement Machine Learning (ML) and Wilcoxon Sign-Rank Test1,2,3,4 and conclude that the YUM 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 Buy YUM stock.


Keywords: YUM, Yum! Brands, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. Stock Rating
  2. How do predictive algorithms actually work?
  3. Is it better to buy and sell or hold?

YUM Target Price Prediction Modeling Methodology

Accurate prediction of stock price movements is highly challenging and significant topic for investors. Investors need to understand that stock price data is the most essential information which is highly volatile, non-linear, and non-parametric and are affected by many uncertainties and interrelated economic and political factors across the globe. Artificial Neural Networks (ANN) have been found to be an efficient tool in modeling stock prices and quite a large number of studies have been done on it. We consider Yum! Brands Stock Decision Process with Wilcoxon Sign-Rank Test where A is the set of discrete actions of YUM 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(Wilcoxon Sign-Rank Test)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(Reinforcement Machine Learning (ML)) X S(n):→ (n+8 weeks) R = 1 0 0 0 1 0 0 0 1

n:Time series to forecast

p:Price signals of YUM 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?

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


Sample Set: Neural Network
Stock/Index: YUM Yum! Brands
Time series to forecast n: 02 Nov 2022 for (n+8 weeks)

According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Buy YUM 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 Yum! Brands

  1. For the purposes of measuring expected credit losses, the estimate of expected cash shortfalls shall reflect the cash flows expected from collateral and other credit enhancements that are part of the contractual terms and are not recognised separately by the entity. The estimate of expected cash shortfalls on a collateralised financial instrument reflects the amount and timing of cash flows that are expected from foreclosure on the collateral less the costs of obtaining and selling the collateral, irrespective of whether foreclosure is probable (ie the estimate of expected cash flows considers the probability of a foreclosure and the cash flows that would result from it). Consequently, any cash flows that are expected from the realisation of the collateral beyond the contractual maturity of the contract should be included in this analysis. Any collateral obtained as a result of foreclosure is not recognised as an asset that is separate from the collateralised financial instrument unless it meets the relevant recognition criteria for an asset in this or other Standards.
  2. In cases such as those described in the preceding paragraph, to designate, at initial recognition, the financial assets and financial liabilities not otherwise so measured as at fair value through profit or loss may eliminate or significantly reduce the measurement or recognition inconsistency and produce more relevant information. For practical purposes, the entity need not enter into all of the assets and liabilities giving rise to the measurement or recognition inconsistency at exactly the same time. A reasonable delay is permitted provided that each transaction is designated as at fair value through profit or loss at its initial recognition and, at that time, any remaining transactions are expected to occur.
  3. When determining whether the recognition of lifetime expected credit losses is required, an entity shall consider reasonable and supportable information that is available without undue cost or effort and that may affect the credit risk on a financial instrument in accordance with paragraph 5.5.17(c). An entity need not undertake an exhaustive search for information when determining whether credit risk has increased significantly since initial recognition.
  4. To calculate the change in the value of the hedged item for the purpose of measuring hedge ineffectiveness, an entity may use a derivative that would have terms that match the critical terms of the hedged item (this is commonly referred to as a 'hypothetical derivative'), and, for example for a hedge of a forecast transaction, would be calibrated using the hedged price (or rate) level. For example, if the hedge was for a two-sided risk at the current market level, the hypothetical derivative would represent a hypothetical forward contract that is calibrated to a value of nil at the time of designation of the hedging relationship. If the hedge was for example for a one-sided risk, the hypothetical derivative would represent the intrinsic value of a hypothetical option that at the time of designation of the hedging relationship is at the money if the hedged price level is the current market level, or out of the money if the hedged price level is above (or, for a hedge of a long position, below) the current market level. Using a hypothetical derivative is one possible way of calculating the change in the value of the hedged item. The hypothetical derivative replicates the hedged item and hence results in the same outcome as if that change in value was determined by a different approach. Hence, using a 'hypothetical derivative' is not a method in its own right but a mathematical expedient that can only be used to calculate the value of the hedged item. Consequently, a 'hypothetical derivative' cannot be used to include features in the value of the hedged item that only exist in the hedging instrument (but not in the hedged item). An example is debt denominated in a foreign currency (irrespective of whether it is fixed-rate or variable-rate debt). When using a hypothetical derivative to calculate the change in the value of such debt or the present value of the cumulative change in its cash flows, the hypothetical derivative cannot simply impute a charge for exchanging different currencies even though actual derivatives under which different currencies are exchanged might include such a charge (for example, cross-currency interest rate swaps).

*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

Yum! Brands assigned short-term Ba3 & long-term B2 forecasted stock rating. We evaluate the prediction models Reinforcement Machine Learning (ML) with Wilcoxon Sign-Rank Test1,2,3,4 and conclude that the YUM 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 Buy YUM stock.

Financial State Forecast for YUM Yum! Brands Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba3B2
Operational Risk 8144
Market Risk5189
Technical Analysis5638
Fundamental Analysis8061
Risk Unsystematic5635

Prediction Confidence Score

Trust metric by Neural Network: 83 out of 100 with 750 signals.

References

  1. Bessler, D. A. T. Covey (1991), "Cointegration: Some results on U.S. cattle prices," Journal of Futures Markets, 11, 461–474.
  2. Van der Vaart AW. 2000. Asymptotic Statistics. Cambridge, UK: Cambridge Univ. Press
  3. R. Williams. Simple statistical gradient-following algorithms for connectionist reinforcement learning. Ma- chine learning, 8(3-4):229–256, 1992
  4. Cortes C, Vapnik V. 1995. Support-vector networks. Mach. Learn. 20:273–97
  5. 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
  6. V. Borkar. Q-learning for risk-sensitive control. Mathematics of Operations Research, 27:294–311, 2002.
  7. Friedman JH. 2002. Stochastic gradient boosting. Comput. Stat. Data Anal. 38:367–78
Frequently Asked QuestionsQ: What is the prediction methodology for YUM stock?
A: YUM stock prediction methodology: We evaluate the prediction models Reinforcement Machine Learning (ML) and Wilcoxon Sign-Rank Test
Q: Is YUM stock a buy or sell?
A: The dominant strategy among neural network is to Buy YUM Stock.
Q: Is Yum! Brands stock a good investment?
A: The consensus rating for Yum! Brands is Buy and assigned short-term Ba3 & long-term B2 forecasted stock rating.
Q: What is the consensus rating of YUM stock?
A: The consensus rating for YUM is Buy.
Q: What is the prediction period for YUM stock?
A: The prediction period for YUM is (n+8 weeks)

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