Modelling A.I. in Economics

BIDU Baidu Inc. ADS

Outlook: Baidu Inc. ADS assigned short-term B3 & long-term B1 forecasted stock rating.
Dominant Strategy : Wait until speculative trend diminishes
Time series to forecast n: 13 Dec 2022 for (n+6 month)
Methodology : Active Learning (ML)

Abstract

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.(Li, J., Bu, H. and Wu, J., 2017, June. Sentiment-aware stock market prediction: A deep learning method. In 2017 international conference on service systems and service management (pp. 1-6). IEEE.) We evaluate Baidu Inc. ADS prediction models with Active Learning (ML) and Chi-Square1,2,3,4 and conclude that the BIDU stock is predictable in the short/long term. According to price forecasts for (n+6 month) period, the dominant strategy among neural network is: Wait until speculative trend diminishes

Key Points

  1. What is the best way to predict stock prices?
  2. How can neural networks improve predictions?
  3. Market Risk

BIDU Target Price Prediction Modeling Methodology

We consider Baidu Inc. ADS Decision Process with Active Learning (ML) where A is the set of discrete actions of BIDU 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(Chi-Square)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(Active Learning (ML)) X S(n):→ (n+6 month) R = 1 0 0 0 1 0 0 0 1

n:Time series to forecast

p:Price signals of BIDU 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?

BIDU Stock Forecast (Buy or Sell) for (n+6 month)

Sample Set: Neural Network
Stock/Index: BIDU Baidu Inc. ADS
Time series to forecast n: 13 Dec 2022 for (n+6 month)

According to price forecasts for (n+6 month) period, the dominant strategy among neural network is: Wait until speculative trend diminishes

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 (Grey to Black): *Technical Analysis%

Adjusted IFRS* Prediction Methods for Baidu Inc. ADS

  1. If the group of items does not have any offsetting risk positions (for example, a group of foreign currency expenses that affect different line items in the statement of profit or loss and other comprehensive income that are hedged for foreign currency risk) then the reclassified hedging instrument gains or losses shall be apportioned to the line items affected by the hedged items. This apportionment shall be done on a systematic and rational basis and shall not result in the grossing up of the net gains or losses arising from a single hedging instrument.
  2. An entity's documentation of the hedging relationship includes how it will assess the hedge effectiveness requirements, including the method or methods used. The documentation of the hedging relationship shall be updated for any changes to the methods (see paragraph B6.4.17).
  3. There is a rebuttable presumption that unless inflation risk is contractually specified, it is not separately identifiable and reliably measurable and hence cannot be designated as a risk component of a financial instrument. However, in limited cases, it is possible to identify a risk component for inflation risk that is separately identifiable and reliably measurable because of the particular circumstances of the inflation environment and the relevant debt market
  4. IFRS 17, issued in May 2017, amended paragraphs 2.1, B2.1, B2.4, B2.5 and B4.1.30, and added paragraph 3.3.5. Amendments to IFRS 17, issued in June 2020, further amended paragraph 2.1 and added paragraphs 7.2.36‒7.2.42. An entity shall apply those amendments when it applies IFRS 17.

*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

Baidu Inc. ADS assigned short-term B3 & long-term B1 forecasted stock rating. We evaluate the prediction models Active Learning (ML) with Chi-Square1,2,3,4 and conclude that the BIDU stock is predictable in the short/long term. According to price forecasts for (n+6 month) period, the dominant strategy among neural network is: Wait until speculative trend diminishes

Financial State Forecast for BIDU Baidu Inc. ADS Options & Futures

Rating Short-Term Long-Term Senior
Outlook*B3B1
Operational Risk 3984
Market Risk3058
Technical Analysis4844
Fundamental Analysis8870
Risk Unsystematic4438

Prediction Confidence Score

Trust metric by Neural Network: 85 out of 100 with 528 signals.

References

  1. Greene WH. 2000. Econometric Analysis. Upper Saddle River, N J: Prentice Hall. 4th ed.
  2. Brailsford, T.J. R.W. Faff (1996), "An evaluation of volatility forecasting techniques," Journal of Banking Finance, 20, 419–438.
  3. Chipman HA, George EI, McCulloch RE. 2010. Bart: Bayesian additive regression trees. Ann. Appl. Stat. 4:266–98
  4. Canova, F. B. E. Hansen (1995), "Are seasonal patterns constant over time? A test for seasonal stability," Journal of Business and Economic Statistics, 13, 237–252.
  5. Hoerl AE, Kennard RW. 1970. Ridge regression: biased estimation for nonorthogonal problems. Technometrics 12:55–67
  6. E. Altman. Constrained Markov decision processes, volume 7. CRC Press, 1999
  7. Tibshirani R, Hastie T. 1987. Local likelihood estimation. J. Am. Stat. Assoc. 82:559–67
Frequently Asked QuestionsQ: What is the prediction methodology for BIDU stock?
A: BIDU stock prediction methodology: We evaluate the prediction models Active Learning (ML) and Chi-Square
Q: Is BIDU stock a buy or sell?
A: The dominant strategy among neural network is to Wait until speculative trend diminishes BIDU Stock.
Q: Is Baidu Inc. ADS stock a good investment?
A: The consensus rating for Baidu Inc. ADS is Wait until speculative trend diminishes and assigned short-term B3 & long-term B1 forecasted stock rating.
Q: What is the consensus rating of BIDU stock?
A: The consensus rating for BIDU is Wait until speculative trend diminishes.
Q: What is the prediction period for BIDU stock?
A: The prediction period for BIDU is (n+6 month)

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