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December 2020 (published: 17.12.2020)
Number 4(43)
Home > Issue > Forecasting the trend dynamics of the stock market based
on macroeconomic factors using a diffuse index
Vakhrushev I.A.
Obtaining forecasts of the trend dynamics of company shares is an important task for financial market participants. Fundamental analysis is based on studies of macroeconomic relationships with stock prices and relationships between financial data and stock prices of selected companies. The central goal of the work is to make forecasts one quarter ahead for the stocks of Russian trading companies that will have relevance. The Diffuse Index has successful examples of its use in forecasting. It is important to consider that the quantitative factors that are included in this index should be at least four and no more than six. The use of the diffuse index is possible as an independent model. However, in this study, this synthetic index will be used as a factor in the regression model in order to improve the accuracy of forecasts. The main feature of the regression model for forecasting the price of shares of Russian companies in the trading industry using the example of LLC Lenta and PJSC Magnit is the use of four indicators - revenue, operating profit, net profit and retained earnings. The forecasting model for these indicators includes four macroeconomic indicators: consumer inflation index, producer inflation index, disposable income growth index and the key interest rate. Moreover, the regression model uses a diffuse index based on financial indicators and the components of the diffuse index as binary variables. As a result of forecasting one quarter (first and second quarters of 2020) ahead, the forecasting accuracy for both companies is above 80%. Using the resulting instrument, you can make a positive profit when trading stocks. The hypothesis of this work was confirmed and the goal was achieved. The usefulness of using a diffuse index has been proven in predicting stock prices.
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Keywords: diffuse index, stocks, forecasting, macroeconomic parameters, testing, financial parameters.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
UDC 338.462
Forecasting the trend dynamics of the stock market based
on macroeconomic factors using a diffuse index
Obtaining forecasts of the trend dynamics of company shares is an important task for financial market participants. Fundamental analysis is based on studies of macroeconomic relationships with stock prices and relationships between financial data and stock prices of selected companies. The central goal of the work is to make forecasts one quarter ahead for the stocks of Russian trading companies that will have relevance. The Diffuse Index has successful examples of its use in forecasting. It is important to consider that the quantitative factors that are included in this index should be at least four and no more than six. The use of the diffuse index is possible as an independent model. However, in this study, this synthetic index will be used as a factor in the regression model in order to improve the accuracy of forecasts. The main feature of the regression model for forecasting the price of shares of Russian companies in the trading industry using the example of LLC Lenta and PJSC Magnit is the use of four indicators - revenue, operating profit, net profit and retained earnings. The forecasting model for these indicators includes four macroeconomic indicators: consumer inflation index, producer inflation index, disposable income growth index and the key interest rate. Moreover, the regression model uses a diffuse index based on financial indicators and the components of the diffuse index as binary variables. As a result of forecasting one quarter (first and second quarters of 2020) ahead, the forecasting accuracy for both companies is above 80%. Using the resulting instrument, you can make a positive profit when trading stocks. The hypothesis of this work was confirmed and the goal was achieved. The usefulness of using a diffuse index has been proven in predicting stock prices.
Read the full article
Keywords: diffuse index, stocks, forecasting, macroeconomic parameters, testing, financial parameters.
DOI 10.17586/2310-1172-2020-13-4-42-46