Modelling A.I. in Economics

Should You Buy, Sell, or Hold? (S&P/ASX 200 Index Stock Forecast) (Forecast)

S&P/ASX 200 Index Research Report

Summary

Finance is one of the pioneering industries that started using Machine Learning (ML), a subset of Artificial Intelligence (AI) in the early 80s for market prediction. Since then, major firms and hedge funds have adopted machine learning for stock prediction, portfolio optimization, credit lending, stock betting, etc. In this paper, we survey all the different approaches of machine learning that can be incorporated in applied finance. We evaluate S&P/ASX 200 Index prediction models with Modular Neural Network (DNN Layer) and Wilcoxon Rank-Sum Test1,2,3,4 and conclude that the S&P/ASX 200 Index 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 Hold S&P/ASX 200 Index stock.

Key Points

  1. Can statistics predict the future?
  2. Is Target price a good indicator?
  3. Nash Equilibria

S&P/ASX 200 Index Target Price Prediction Modeling Methodology

We consider S&P/ASX 200 Index Stock Decision Process with Modular Neural Network (DNN Layer) where A is the set of discrete actions of S&P/ASX 200 Index 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 Rank-Sum 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(Modular Neural Network (DNN Layer)) X S(n):→ (n+1 year) R = r 1 r 2 r 3

n:Time series to forecast

p:Price signals of S&P/ASX 200 Index 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?

S&P/ASX 200 Index Stock Forecast (Buy or Sell) for (n+1 year)

Sample Set: Neural Network
Stock/Index: S&P/ASX 200 Index S&P/ASX 200 Index
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 Hold S&P/ASX 200 Index 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 S&P/ASX 200 Index

  1. The characteristics of the hedged item, including how and when the hedged item affects profit or loss, also affect the period over which the forward element of a forward contract that hedges a time-period related hedged item is amortised, which is over the period to which the forward element relates. For example, if a forward contract hedges the exposure to variability in threemonth interest rates for a three-month period that starts in six months' time, the forward element is amortised during the period that spans months seven to nine.
  2. The accounting for the forward element of forward contracts in accordance with paragraph 6.5.16 applies only to the extent that the forward element relates to the hedged item (aligned forward element). The forward element of a forward contract relates to the hedged item if the critical terms of the forward contract (such as the nominal amount, life and underlying) are aligned with the hedged item. Hence, if the critical terms of the forward contract and the hedged item are not fully aligned, an entity shall determine the aligned forward element, ie how much of the forward element included in the forward contract (actual forward element) relates to the hedged item (and therefore should be treated in accordance with paragraph 6.5.16). An entity determines the aligned forward element using the valuation of the forward contract that would have critical terms that perfectly match the hedged item.
  3. To the extent that a transfer of a financial asset does not qualify for derecognition, the transferor's contractual rights or obligations related to the transfer are not accounted for separately as derivatives if recognising both the derivative and either the transferred asset or the liability arising from the transfer would result in recognising the same rights or obligations twice. For example, a call option retained by the transferor may prevent a transfer of financial assets from being accounted for as a sale. In that case, the call option is not separately recognised as a derivative asset.
  4. 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).

*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

S&P/ASX 200 Index assigned short-term Ba3 & long-term Ba3 forecasted stock rating. We evaluate the prediction models Modular Neural Network (DNN Layer) with Wilcoxon Rank-Sum Test1,2,3,4 and conclude that the S&P/ASX 200 Index 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 Hold S&P/ASX 200 Index stock.

Financial State Forecast for S&P/ASX 200 Index S&P/ASX 200 Index Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba3Ba3
Operational Risk 5046
Market Risk8479
Technical Analysis8282
Fundamental Analysis4343
Risk Unsystematic6479

Prediction Confidence Score

Trust metric by Neural Network: 74 out of 100 with 635 signals.

References

  1. Künzel S, Sekhon J, Bickel P, Yu B. 2017. Meta-learners for estimating heterogeneous treatment effects using machine learning. arXiv:1706.03461 [math.ST]
  2. Athey S, Bayati M, Doudchenko N, Imbens G, Khosravi K. 2017a. Matrix completion methods for causal panel data models. arXiv:1710.10251 [math.ST]
  3. Bessler, D. A. T. Covey (1991), "Cointegration: Some results on U.S. cattle prices," Journal of Futures Markets, 11, 461–474.
  4. Künzel S, Sekhon J, Bickel P, Yu B. 2017. Meta-learners for estimating heterogeneous treatment effects using machine learning. arXiv:1706.03461 [math.ST]
  5. Mikolov T, Chen K, Corrado GS, Dean J. 2013a. Efficient estimation of word representations in vector space. arXiv:1301.3781 [cs.CL]
  6. Breiman L. 2001b. Statistical modeling: the two cultures (with comments and a rejoinder by the author). Stat. Sci. 16:199–231
  7. Ashley, R. (1983), "On the usefulness of macroeconomic forecasts as inputs to forecasting models," Journal of Forecasting, 2, 211–223.
Frequently Asked QuestionsQ: What is the prediction methodology for S&P/ASX 200 Index stock?
A: S&P/ASX 200 Index stock prediction methodology: We evaluate the prediction models Modular Neural Network (DNN Layer) and Wilcoxon Rank-Sum Test
Q: Is S&P/ASX 200 Index stock a buy or sell?
A: The dominant strategy among neural network is to Hold S&P/ASX 200 Index Stock.
Q: Is S&P/ASX 200 Index stock a good investment?
A: The consensus rating for S&P/ASX 200 Index is Hold and assigned short-term Ba3 & long-term Ba3 forecasted stock rating.
Q: What is the consensus rating of S&P/ASX 200 Index stock?
A: The consensus rating for S&P/ASX 200 Index is Hold.
Q: What is the prediction period for S&P/ASX 200 Index stock?
A: The prediction period for S&P/ASX 200 Index is (n+1 year)

Premium

  • Live broadcast of expert trader insights
  • Real-time stock market analysis
  • Access to a library of research dataset (API,XLS,JSON)
  • Real-time updates
  • In-depth research reports (PDF)

Login
This project is licensed under the license; additional terms may apply.