PSI-20 Index: Where Will It Go Next?

Outlook: PSI-20 index is assigned short-term Baa2 & long-term Ba2 estimated rating.
AUC Score : What is AUC Score?
Short-Term Revised¹ :
Dominant Strategy :
Time series to forecast n: for Weeks²
ML Model Testing : Modular Neural Network (News Feed Sentiment Analysis)
Hypothesis Testing : Independent T-Test
Surveillance : Major exchange and OTC

¹The accuracy of the model is being monitored on a regular basis.(15-minute period)

²Time series is updated based on short-term trends.

Key Points

The PSI-20 is likely to experience volatility in the coming months, influenced by global economic conditions, interest rate fluctuations, and geopolitical tensions. Rising inflation and potential recessionary pressures in major economies could impact corporate earnings and investor sentiment, leading to a downward correction. Conversely, robust domestic economic growth and positive corporate earnings could support a bullish trend. The potential for increased interest rates, however, could dampen investor enthusiasm and contribute to market volatility. Geopolitical events, such as the ongoing conflict in Ukraine, also pose risks to the index's performance, as they can introduce uncertainty and disrupt global markets. Therefore, investors should exercise caution and monitor economic indicators closely to navigate the potential risks and opportunities associated with the PSI-20.

About PSI-20 Index

The PSI-20 is a stock market index that measures the performance of the twenty largest and most liquid companies listed on the Euronext Lisbon stock exchange. It is a capitalization-weighted index, meaning that larger companies have a greater influence on the index's value. The PSI-20 is a widely followed benchmark for the Portuguese stock market and is used by investors and analysts to track the overall health of the economy.

The PSI-20 is calculated and maintained by Euronext Lisbon. It is a key indicator of investor sentiment towards the Portuguese economy and its constituent companies. The index is used by investors to make investment decisions, by analysts to track market trends, and by policymakers to assess the performance of the economy.

Navigating the Fluctuations: A Machine Learning Approach to PSI-20 Index Forecasting

Predicting the PSI-20 index, a benchmark for the Portuguese stock market, is a complex endeavor. It necessitates the integration of various economic and financial indicators, historical market data, and external factors that influence investor sentiment. Our machine learning model tackles this challenge by employing a robust ensemble approach, combining the strengths of different algorithms to capture the intricate dynamics of the PSI-20. This ensemble model leverages historical data on the PSI-20, key economic indicators such as GDP growth, inflation, and interest rates, as well as sentiment data from news articles and social media platforms. By incorporating these diverse data sources, the model aims to identify patterns and relationships that drive the index's fluctuations.

The model employs a multi-layered approach, starting with feature engineering to extract relevant information from raw data. This includes transforming categorical variables, creating lagged features to capture temporal dependencies, and applying dimensionality reduction techniques to manage data complexity. Subsequently, we utilize a combination of machine learning algorithms, including gradient boosting, support vector machines, and recurrent neural networks, to learn from the processed data and generate accurate predictions. The specific algorithms are chosen based on their strengths in capturing different aspects of the index's behavior, resulting in a more robust and comprehensive model.

This machine learning model is continuously refined and validated using historical data and real-time market information. Backtesting ensures the model's predictive power, while real-time monitoring allows for adjustments based on evolving market conditions. The ultimate goal is to provide investors with a valuable tool for informed decision-making by offering reliable insights into the potential future movements of the PSI-20 index.

ML Model Testing

F(Independent T-Test)^6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Modular Neural Network (News Feed Sentiment Analysis))^3,4,5 X S(n):→ 6 Month $R=\left(\begin{array}{ccc}1& 0& 0\\ 0& 1& 0\\ 0& 0& 1\end{array}\right)$

n:Time series to forecast

p:Price signals of PSI-20 index

j:Nash equilibria (Neural Network)

k:Dominated move of PSI-20 index holders

a:Best response for PSI-20 target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do KappaSignal algorithms actually work?

PSI-20 Index Forecast Strategic Interaction Table

Strategic Interaction Table Legend:

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%

Navigating Uncertainty: Outlook and Predictions for the PSI-20 Index

The PSI-20, Portugal's benchmark stock index, faces a complex landscape in the coming months. Its trajectory will be influenced by a confluence of global and domestic factors, painting a picture of potential growth alongside inherent risks. While the index has shown resilience in recent times, several factors require careful consideration.

Global macroeconomic headwinds remain a key concern. The ongoing war in Ukraine, coupled with persistent inflation and aggressive monetary tightening by central banks, continue to cast shadows over global economic prospects. This uncertainty could lead to volatility in the PSI-20, as investors navigate the evolving landscape. However, Portugal's robust tourism sector, a key driver of economic growth, could offer some cushioning against global downturns.

Domestically, Portugal's economic outlook is characterized by a delicate balancing act. While the government is committed to fiscal consolidation, the need to address social pressures and maintain public support will require careful policy decisions. The upcoming budget negotiations will be a crucial test, determining the government's ability to navigate the competing demands of fiscal discipline and social welfare. The PSI-20's performance will be highly sensitive to the outcome of these negotiations.

In conclusion, the PSI-20's future hinges on a careful interplay of global and domestic dynamics. While the index holds potential for growth, driven by sectors like tourism and a gradual economic recovery, it faces significant challenges. Managing global risks, achieving fiscal sustainability, and navigating political complexities will all play a role in shaping the PSI-20's trajectory. Investors should carefully assess these factors and exercise caution, recognizing the inherent volatility of the market.

Rating	Short-Term	Long-Term Senior
Outlook	Baa2	Ba2
Income Statement	Baa2	C
Balance Sheet	Ba2	Baa2
Leverage Ratios	B2	Baa2
Cash Flow	Baa2	Baa2
Rates of Return and Profitability	Baa2	Ba3

*An aggregate rating for an index summarizes the overall sentiment towards the companies it includes. This rating is calculated by considering individual ratings assigned to each stock within the index. By taking an average of these ratings, weighted by each stock's importance in the index, a single score is generated. This aggregate rating offers a simplified view of how the index's performance is generally perceived.
How does neural network examine financial reports and understand financial state of the company?

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