Modelling A.I. in Economics

When to Sell and When to Hold TOL Stock (Forecast)

Security indices are the main tools for evaluation of the status of financial markets. Moreover, a main part of the economy of any country is constituted of investment in stock markets. Therefore, investors could maximize the return of investment if it becomes possible to predict the future trend of stock market with appropriate methods. The nonlinearity and nonstationarity of financial series make their prediction complicated. This study seeks to evaluate the prediction power of machine-learning models in a stock market. We evaluate Toll Brothers prediction models with Modular Neural Network (Market Volatility Analysis) and Paired T-Test1,2,3,4 and conclude that the TOL 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 Sell TOL stock.


Keywords: TOL, Toll Brothers, stock forecast, machine learning based prediction, risk rating, buy-sell behaviour, stock analysis, target price analysis, options and futures.

Key Points

  1. Why do we need predictive models?
  2. What are main components of Markov decision process?
  3. Fundemental Analysis with Algorithmic Trading

TOL Target Price Prediction Modeling Methodology

Recently, a lot of interesting work has been done in the area of applying Machine Learning Algorithms for analyzing price patterns and predicting stock prices and index changes. Most stock traders nowadays depend on Intelligent Trading Systems which help them in predicting prices based on various situations and conditions, thereby helping them in making instantaneous investment decisions. We consider Toll Brothers Stock Decision Process with Paired T-Test where A is the set of discrete actions of TOL 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(Paired T-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 (Market Volatility Analysis)) X S(n):→ (n+8 weeks) r s rs

n:Time series to forecast

p:Price signals of TOL 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?

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

Sample Set: Neural Network
Stock/Index: TOL Toll Brothers
Time series to forecast n: 01 Nov 2022 for (n+8 weeks)

According to price forecasts for (n+8 weeks) period: The dominant strategy among neural network is to Sell TOL 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 Toll Brothers

  1. If any instrument in the pool does not meet the conditions in either paragraph B4.1.23 or paragraph B4.1.24, the condition in paragraph B4.1.21(b) is not met. In performing this assessment, a detailed instrument-byinstrument analysis of the pool may not be necessary. However, an entity must use judgement and perform sufficient analysis to determine whether the instruments in the pool meet the conditions in paragraphs B4.1.23–B4.1.24. (See also paragraph B4.1.18 for guidance on contractual cash flow characteristics that have only a de minimis effect.)
  2. Paragraph 5.7.5 permits an entity to make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of particular investments in equity instruments. Such an investment is not a monetary item. Accordingly, the gain or loss that is presented in other comprehensive income in accordance with paragraph 5.7.5 includes any related foreign exchange component.
  3. At the date of initial application, an entity is permitted to make the designation in paragraph 2.5 for contracts that already exist on the date but only if it designates all similar contracts. The change in the net assets resulting from such designations shall be recognised in retained earnings at the date of initial application.
  4. IFRS 15, issued in May 2014, amended paragraphs 3.1.1, 4.2.1, 5.1.1, 5.2.1, 5.7.6, B3.2.13, B5.7.1, C5 and C42 and deleted paragraph C16 and its related heading. Paragraphs 5.1.3 and 5.7.1A, and a definition to Appendix A, were added. An entity shall apply those amendments when it applies IFRS 15.

*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

Toll Brothers assigned short-term B3 & long-term Ba3 forecasted stock rating. We evaluate the prediction models Modular Neural Network (Market Volatility Analysis) with Paired T-Test1,2,3,4 and conclude that the TOL 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 Sell TOL stock.

Financial State Forecast for TOL Toll Brothers Stock Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B3Ba3
Operational Risk 5368
Market Risk5255
Technical Analysis6279
Fundamental Analysis4051
Risk Unsystematic4366

Prediction Confidence Score

Trust metric by Neural Network: 77 out of 100 with 692 signals.

References

  1. Zou H, Hastie T. 2005. Regularization and variable selection via the elastic net. J. R. Stat. Soc. B 67:301–20
  2. Athey S, Imbens GW. 2017a. The econometrics of randomized experiments. In Handbook of Economic Field Experiments, Vol. 1, ed. E Duflo, A Banerjee, pp. 73–140. Amsterdam: Elsevier
  3. N. B ̈auerle and J. Ott. Markov decision processes with average-value-at-risk criteria. Mathematical Methods of Operations Research, 74(3):361–379, 2011
  4. Alpaydin E. 2009. Introduction to Machine Learning. Cambridge, MA: MIT Press
  5. Athey S, Imbens G, Wager S. 2016a. Efficient inference of average treatment effects in high dimensions via approximate residual balancing. arXiv:1604.07125 [math.ST]
  6. D. Bertsekas and J. Tsitsiklis. Neuro-dynamic programming. Athena Scientific, 1996.
  7. Hastie T, Tibshirani R, Tibshirani RJ. 2017. Extended comparisons of best subset selection, forward stepwise selection, and the lasso. arXiv:1707.08692 [stat.ME]
Frequently Asked QuestionsQ: What is the prediction methodology for TOL stock?
A: TOL stock prediction methodology: We evaluate the prediction models Modular Neural Network (Market Volatility Analysis) and Paired T-Test
Q: Is TOL stock a buy or sell?
A: The dominant strategy among neural network is to Sell TOL Stock.
Q: Is Toll Brothers stock a good investment?
A: The consensus rating for Toll Brothers is Sell and assigned short-term B3 & long-term Ba3 forecasted stock rating.
Q: What is the consensus rating of TOL stock?
A: The consensus rating for TOL is Sell.
Q: What is the prediction period for TOL stock?
A: The prediction period for TOL is (n+8 weeks)

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