SZSE Component Index Research Report

## Summary

Prediction of stock prices has been an important area of research for a long time. While supporters of the efficient market hypothesis believe that it is impossible to predict stock prices accurately, there are formal propositions demonstrating that accurate modeling and designing of appropriate variables may lead to models using which stock prices and stock price movement patterns can be very accurately predicted. We evaluate SZSE Component Index prediction models with Modular Neural Network (Market Volatility Analysis) and Spearman Correlation1,2,3,4 and conclude that the SZSE Component 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 SZSE Component Index stock.

## Key Points

1. What is the use of Markov decision process?
2. What is Markov decision process in reinforcement learning?
3. Game Theory

## SZSE Component Index Target Price Prediction Modeling Methodology

We consider SZSE Component Index Stock Decision Process with Modular Neural Network (Market Volatility Analysis) where A is the set of discrete actions of SZSE Component 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(Spearman Correlation)5,6,7= $\begin{array}{cccc}{p}_{a1}& {p}_{a2}& \dots & {p}_{1n}\\ & ⋮\\ {p}_{j1}& {p}_{j2}& \dots & {p}_{jn}\\ & ⋮\\ {p}_{k1}& {p}_{k2}& \dots & {p}_{kn}\\ & ⋮\\ {p}_{n1}& {p}_{n2}& \dots & {p}_{nn}\end{array}$ X R(Modular Neural Network (Market Volatility Analysis)) X S(n):→ (n+1 year) $∑ i = 1 n a i$

n:Time series to forecast

p:Price signals of SZSE Component 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?

## SZSE Component Index Stock Forecast (Buy or Sell) for (n+1 year)

Sample Set: Neural Network
Stock/Index: SZSE Component Index SZSE Component Index
Time series to forecast n: 26 Nov 2022 for (n+1 year)

According to price forecasts for (n+1 year) period: The dominant strategy among neural network is to Hold SZSE Component 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 SZSE Component Index

1. If, at the date of initial application, determining whether there has been a significant increase in credit risk since initial recognition would require undue cost or effort, an entity shall recognise a loss allowance at an amount equal to lifetime expected credit losses at each reporting date until that financial instrument is derecognised (unless that financial instrument is low credit risk at a reporting date, in which case paragraph 7.2.19(a) applies).
2. Hedge effectiveness is the extent to which changes in the fair value or the cash flows of the hedging instrument offset changes in the fair value or the cash flows of the hedged item (for example, when the hedged item is a risk component, the relevant change in fair value or cash flows of an item is the one that is attributable to the hedged risk). Hedge ineffectiveness is the extent to which the changes in the fair value or the cash flows of the hedging instrument are greater or less than those on the hedged item.
3. A regular way purchase or sale gives rise to a fixed price commitment between trade date and settlement date that meets the definition of a derivative. However, because of the short duration of the commitment it is not recognised as a derivative financial instrument. Instead, this Standard provides for special accounting for such regular way contracts (see paragraphs 3.1.2 and B3.1.3–B3.1.6).
4. Paragraph 6.3.4 permits an entity to designate as hedged items aggregated exposures that are a combination of an exposure and a derivative. When designating such a hedged item, an entity assesses whether the aggregated exposure combines an exposure with a derivative so that it creates a different aggregated exposure that is managed as one exposure for a particular risk (or risks). In that case, the entity may designate the hedged item on the basis of the aggregated exposure

*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

SZSE Component Index assigned short-term B3 & long-term B1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Market Volatility Analysis) with Spearman Correlation1,2,3,4 and conclude that the SZSE Component 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 SZSE Component Index stock.

### Financial State Forecast for SZSE Component Index SZSE Component Index Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B3B1
Operational Risk 8044
Market Risk4367
Technical Analysis3477
Fundamental Analysis3032
Risk Unsystematic4363

### Prediction Confidence Score

Trust metric by Neural Network: 87 out of 100 with 800 signals.

## References

1. Andrews, D. W. K. W. Ploberger (1994), "Optimal tests when a nuisance parameter is present only under the alternative," Econometrica, 62, 1383–1414.
2. Breusch, T. S. A. R. Pagan (1979), "A simple test for heteroskedasticity and random coefficient variation," Econometrica, 47, 1287–1294.
3. T. Shardlow and A. Stuart. A perturbation theory for ergodic Markov chains and application to numerical approximations. SIAM journal on numerical analysis, 37(4):1120–1137, 2000
4. S. J. Russell and A. Zimdars. Q-decomposition for reinforcement learning agents. In Machine Learning, Proceedings of the Twentieth International Conference (ICML 2003), August 21-24, 2003, Washington, DC, USA, pages 656–663, 2003.
5. M. L. Littman. Markov games as a framework for multi-agent reinforcement learning. In Ma- chine Learning, Proceedings of the Eleventh International Conference, Rutgers University, New Brunswick, NJ, USA, July 10-13, 1994, pages 157–163, 1994
6. D. S. Bernstein, S. Zilberstein, and N. Immerman. The complexity of decentralized control of Markov Decision Processes. In UAI '00: Proceedings of the 16th Conference in Uncertainty in Artificial Intelligence, Stanford University, Stanford, California, USA, June 30 - July 3, 2000, pages 32–37, 2000.
7. Athey S, Bayati M, Imbens G, Zhaonan Q. 2019. Ensemble methods for causal effects in panel data settings. NBER Work. Pap. 25675
Frequently Asked QuestionsQ: What is the prediction methodology for SZSE Component Index stock?
A: SZSE Component Index stock prediction methodology: We evaluate the prediction models Modular Neural Network (Market Volatility Analysis) and Spearman Correlation
Q: Is SZSE Component Index stock a buy or sell?
A: The dominant strategy among neural network is to Hold SZSE Component Index Stock.
Q: Is SZSE Component Index stock a good investment?
A: The consensus rating for SZSE Component Index is Hold and assigned short-term B3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of SZSE Component Index stock?
A: The consensus rating for SZSE Component Index is Hold.
Q: What is the prediction period for SZSE Component Index stock?
A: The prediction period for SZSE Component Index is (n+1 year)