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Buy or Sell?

Buy or Sell?. The age old question. Introduction. Goals: Predict stocks one year out with a MLP Prove you only need small selection of data to forecast the market. Data.

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Buy or Sell?

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  1. Buy or Sell? The age old question

  2. Introduction Goals: • Predict stocks one year out with a MLP • Prove you only need small selection of data to forecast the market

  3. Data One of my primary goals with this assignment was to prove that you only needed a handful of different pieces of data to predict that stock market.

  4. Price • The price you pay for a stock and the price you sell a stock at determine how well you do in the stock market.

  5. PE Ratio • The PE ratio allows for the simplest comparison between different shares, as companies within a particular industry generally fall within a certain PE range. Comparisons between companies in different industries, however, are generally not appropriate using the Price to Earnings ratio. I learned the hard way during the dot bust that a PE ratio of a 100 really isn’t a deal.

  6. Volume Volume plainly put is the number of shares bought and sold for a given period. A large percentage price increase accompanied by a higher than average volume is a strong indicator of future price movements. A large percentage price movement accompanied by lower than average volume is a very weak indicator of higher prices, and is, in fact, an indicator that a correction in prices is possible.

  7. Williams %R: Popular way for measuring overbought and oversold levels. The scale ranges from 0 to -100 with readings from 0 to -20 considered overbought, and readings from -80 to -100 considered oversold.

  8. Neural Networks Used • Back Prorogation • K-Nearest Neighbor • BP proved to be the most successful

  9. Results

  10. Baseline test • K-Nearest Neighbor was used as a baseline.

  11. Conclusions • On average 75% prediction rate vs. a baseline of 67%. • Proved you can use MLPs to predict the stockmarket • If you pick the right data, you don’t need much of it.

  12. Buy or Sell? For the stocks I predicted here are results: Sell GE Buy 3M, Microsoft, and Wal-Mart

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