Modelling A.I. in Economics

When should you buy or sell a stock? (BK Stock Forecast) (Forecast)

Stock market trading is an activity in which investors need fast and accurate information to make effective decisions. Since many stocks are traded on a stock exchange, numerous factors influence the decision-making process. Moreover, the behaviour of stock prices is uncertain and hard to predict. For these reasons, stock price prediction is an important process and a challenging one. We evaluate BNY Mellon prediction models with Modular Neural Network (News Feed Sentiment Analysis) and Pearson Correlation1,2,3,4 and conclude that the BK stock is predictable in the short/long term. According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Hold BK stock.


Keywords: BK, BNY Mellon, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. How accurate is machine learning in stock market?
  2. Why do we need predictive models?
  3. What is prediction in deep learning?

BK Target Price Prediction Modeling Methodology

This study aims to predict the direction of stock prices by integrating time-varying effective transfer entropy (ETE) and various machine learning algorithms. At first, we explore that the ETE based on 3 and 6 months moving windows can be regarded as the market explanatory variable by analyzing the association between the financial crises and Granger-causal relationships among the stocks. We consider BNY Mellon Stock Decision Process with Pearson Correlation where A is the set of discrete actions of BK 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(Pearson Correlation)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 (News Feed Sentiment Analysis)) X S(n):→ (n+3 month) i = 1 n r i

n:Time series to forecast

p:Price signals of BK 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?

BK Stock Forecast (Buy or Sell) for (n+3 month)


Sample Set: Neural Network
Stock/Index: BK BNY Mellon
Time series to forecast n: 04 Nov 2022 for (n+3 month)

According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Hold BK 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 BNY Mellon

  1. As with all fair value measurements, an entity's measurement method for determining the portion of the change in the liability's fair value that is attributable to changes in its credit risk must make maximum use of relevant observable inputs and minimum use of unobservable inputs.
  2. Paragraph 6.3.6 states that in consolidated financial statements the foreign currency risk of a highly probable forecast intragroup transaction may qualify as a hedged item in a cash flow hedge, provided that the transaction is denominated in a currency other than the functional currency of the entity entering into that transaction and that the foreign currency risk will affect consolidated profit or loss. For this purpose an entity can be a parent, subsidiary, associate, joint arrangement or branch. If the foreign currency risk of a forecast intragroup transaction does not affect consolidated profit or loss, the intragroup transaction cannot qualify as a hedged item. This is usually the case for royalty payments, interest payments or management charges between members of the same group, unless there is a related external transaction. However, when the foreign currency risk of a forecast intragroup transaction will affect consolidated profit or loss, the intragroup transaction can qualify as a hedged item. An example is forecast sales or purchases of inventories between members of the same group if there is an onward sale of the inventory to a party external to the group. Similarly, a forecast intragroup sale of plant and equipment from the group entity that manufactured it to a group entity that will use the plant and equipment in its operations may affect consolidated profit or loss. This could occur, for example, because the plant and equipment will be depreciated by the purchasing entity and the amount initially recognised for the plant and equipment may change if the forecast intragroup transaction is denominated in a currency other than the functional currency of the purchasing entity.
  3. For example, an entity hedges an exposure to Foreign Currency A using a currency derivative that references Foreign Currency B and Foreign Currencies A and B are pegged (ie their exchange rate is maintained within a band or at an exchange rate set by a central bank or other authority). If the exchange rate between Foreign Currency A and Foreign Currency B were changed (ie a new band or rate was set), rebalancing the hedging relationship to reflect the new exchange rate would ensure that the hedging relationship would continue to meet the hedge effectiveness requirement for the hedge ratio in the new circumstances. In contrast, if there was a default on the currency derivative, changing the hedge ratio could not ensure that the hedging relationship would continue to meet that hedge effectiveness requirement. Hence, rebalancing does not facilitate the continuation of a hedging relationship in situations in which the relationship between the hedging instrument and the hedged item changes in a way that cannot be compensated for by adjusting the hedge ratio
  4. For hedges other than hedges of foreign currency risk, when an entity designates a non-derivative financial asset or a non-derivative financial liability measured at fair value through profit or loss as a hedging instrument, it may only designate the non-derivative financial instrument in its entirety or a proportion of it.

*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

BNY Mellon assigned short-term Ba1 & long-term B1 forecasted stock rating. We evaluate the prediction models Modular Neural Network (News Feed Sentiment Analysis) with Pearson Correlation1,2,3,4 and conclude that the BK stock is predictable in the short/long term. According to price forecasts for (n+3 month) period: The dominant strategy among neural network is to Hold BK stock.

Financial State Forecast for BK BNY Mellon Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*Ba1B1
Operational Risk 9037
Market Risk5731
Technical Analysis9089
Fundamental Analysis4986
Risk Unsystematic7352

Prediction Confidence Score

Trust metric by Neural Network: 85 out of 100 with 846 signals.

References

  1. Andrews, D. W. K. (1993), "Tests for parameter instability and structural change with unknown change point," Econometrica, 61, 821–856.
  2. Sutton RS, Barto AG. 1998. Reinforcement Learning: An Introduction. Cambridge, MA: MIT Press
  3. Belsley, D. A. (1988), "Modelling and forecast reliability," International Journal of Forecasting, 4, 427–447.
  4. Mazumder R, Hastie T, Tibshirani R. 2010. Spectral regularization algorithms for learning large incomplete matrices. J. Mach. Learn. Res. 11:2287–322
  5. V. Borkar. A sensitivity formula for the risk-sensitive cost and the actor-critic algorithm. Systems & Control Letters, 44:339–346, 2001
  6. Hastie T, Tibshirani R, Wainwright M. 2015. Statistical Learning with Sparsity: The Lasso and Generalizations. New York: CRC Press
  7. Wooldridge JM. 2010. Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press
Frequently Asked QuestionsQ: What is the prediction methodology for BK stock?
A: BK stock prediction methodology: We evaluate the prediction models Modular Neural Network (News Feed Sentiment Analysis) and Pearson Correlation
Q: Is BK stock a buy or sell?
A: The dominant strategy among neural network is to Hold BK Stock.
Q: Is BNY Mellon stock a good investment?
A: The consensus rating for BNY Mellon is Hold and assigned short-term Ba1 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of BK stock?
A: The consensus rating for BK is Hold.
Q: What is the prediction period for BK stock?
A: The prediction period for BK is (n+3 month)

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