Stock Index and FX forecast backtesting is the method for assessing performance of STOKAI’s algorithms “ex-post”. So, we plot the forecast against actual market move over last 10 days.
Please select a market to view respective Stock Index or FX forecast backtest results or skip to the articles below.
stock index fx forecast: backtesting results
stock index fx forecast: short articles
stock index fx forecast – backtesting explained
Backtesting is the method for seeing how well a stock index or fx forecast algorithm is working. It assesses the performance of the algorithm by discovering how it would play out using historical data.
Therefore, we show actual results over the last 10 days, plotted against forecast from 10 days ago. And, this insight and market news on the day is key to form a view of the market going forward.
However, it is to be expected that the stock index & fx forecast will follow a more rounded and gradual step movement over the future time horizon than actual results. This is because extreme movements are removed when building the algorithm.
stock index & fx forecast – user guide
On some days, markets work efficiently. Hence, when viewing the backtesting results the graph will track very closely with the realised data.
On the other hand, if you find that there is deviation from forecast path. And it can’t be attributed to some specific news on the trading day(remember that the forecast is based on previous day’s close). Then, this is because one of the macroeconomic variables has changed but not yet reported. It could be interest rates, inflation figures, unemployment rate etc. With time, and practice, you will develop intuition on which variable this is.
Finally, sometimes the algorithm output will be very extreme values. In other words, you will see a forecast which is seemingly unrealistic for one or a few dates in the future. In such cases, understand that central policy makers also use similar algorithms to forecast future prices. Hence, you will see an announcement in the news, that will correct the macro economic variable input causing such an extreme movement. For instance, it could be interest rate change, bond buy back, other market stimulus etc.
single stock forecast
Single stocks have a lot of idiosyncrasies and they are not very sensitive to macroeconomic variables. Therefore, STOKAI algorithms will not work with forecasting single named stocks.
Building single stock algorithms will require a large research team and will therefore make it expensive for average customer to afford. Hence we have not built these into STOKAI in keeping with our original mission and values. “Making Stock Index & FX forecast algorithms accessible to retail traders.”
5 interesting facts about S&P 500
- Top 5 companies of S&P 500 as of 19-May-2020 are tech companies – Microsoft, Apple, Amazon, Facebook and Alphabet(Google)
- These 5 companies taken together account for 20% of total mkt capitalisation of the entire index of 500 companies. [hint: add up the weights for these companies in above picture.
- There are more than 500 companies in S&P 500. This is because some companies have issued more than one class of shares and each such class is counted as a separate component of S&P 500, with it’s own weighting and therefore it’s own rank
- Between 1957 to its 50th anniversary in 2007, only 86 of the original 500 companies still remained. The other 414 had either gone bankrupt, been taken over, merged or been removed from the index. In that 50-year span, nearly 1,000 companies had been, at some point, added to the index.
- S&P 500 used to be called Composite Index before 1957. It was formed in 1929 with 90 companies.
5 interesting facts about FTSE 100
- The FTSE 100 Index is maintained by the FTSE Group. FTSE Group originated as a joint venture between the Financial Times and the London Stock Exchange (Hence the name FTSE)
- FTSE Group calculates the FTSE 100 index real time and publishes every 15 seconds.
- The only working day FTSE 100 was not functioning was Friday 16-Oct, 1987, the day after the great storm.
- FTSE 100 companies represent about 80% of the market cap of the entire London Stock Exchange.
- FTSE 100’s biggest one day drop was on 20-Oct, 1987. The index fell by 12.22% or 250.7 points. The Black Monday.
brief history of the Euro(EUR) to Dollar(USD) Currency Pair
EUR/USD is the most popular currency pair by traded volume in the world.
The Fx market in the the late 90s was significantly different from the way it is today. Back then, the German Deutschmark against the US dollar was one of the big pairs, along with the French Franc versus the US dollar.
It didn’t take long before the course of currency conversion history changed however, because on 1 January 1999, the Euro was born. The original Euro Dollar exchange rate 1.1686.
two most important factors for EUR/USD forecast
Firstly, the strength of the underlying economy. And secondly, the monetary policy. Of course, the latter is very much tied to the former. As the timeframes shorten, forecast starts to come into focus more and more. Therefore, expectations over central bank policy also have a major impact.
The FED has a dual mandate:
- To foster maximum employment
- To stabilise prices
In contrast, the ECB’s primary objective is price stability. This disparity in policy consequently led to some interesting effects on the Euro-Dollar exchange rate. In fact, for an extended period, the most important EUR/USD Forex news stories trending, was about FED stimulus.
net present value explained
Net Present Value is the difference between present value of future cash inflows and outflows over a period of time. The industry uses NPV in capital budgeting and asset pricing to work out potential profitability of an investment.
We calculate this by discounting future cashflows with the time value of money. In simplest terms, time value of money is risk free interest rate that can be earned on money, if invested today. We assume that an investment with a positive NPV will be profitable, and an investment with a negative NPV will result in a net loss.
Stokai is a product of Rumble Horse Tech ltd. A company registered in England.