ATX Index Poised for Moderate Growth Amidst Economic Uncertainty

Outlook: ATX index is assigned short-term Ba2 & long-term Ba2 estimated rating.
AUC Score : What is AUC Score?
Short-term Tactic¹ :
Dominant Strategy :
Time series to forecast n: for Weeks²
ML Model Testing : Statistical Inference (ML)
Hypothesis Testing : Factor
Surveillance : Major exchange and OTC

¹Short-term revised.

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

Key Points

The ATX index is likely to experience moderate growth, driven by positive developments in the Austrian economy and increased investor confidence. However, this positive outlook is tempered by several risks. **A potential global economic slowdown could negatively impact export-oriented Austrian companies, leading to reduced earnings and lower stock valuations**. Rising inflation and associated interest rate hikes pose a further threat, potentially dampening consumer spending and corporate investments, which in turn could suppress growth within the ATX. **Geopolitical uncertainties and heightened market volatility represent significant risks that can result in rapid and unpredictable shifts in the index's performance**.

About ATX Index

The ATX, or Austrian Traded Index, serves as the benchmark stock market index for the Vienna Stock Exchange. It represents a selection of the most actively traded and largest companies listed on the exchange, providing a comprehensive overview of the Austrian equity market's performance. The index is capitalization-weighted, meaning the impact of each company on the index's movement is proportional to its market capitalization, which is the total value of its outstanding shares.

Regular reviews and adjustments are conducted to ensure the ATX accurately reflects the prevailing market conditions and the composition of the Austrian economy. These reviews may involve the inclusion or exclusion of companies based on criteria such as trading volume, market capitalization, and free float. As a crucial indicator, the ATX is closely monitored by investors, analysts, and financial institutions as it is a key indicator of the Austrian economy's health and provides valuable insights into market trends for both domestic and international investors.

ATX Index Forecasting Machine Learning Model

Our team proposes a machine learning model for forecasting the Austrian Traded Index (ATX). The model will employ a hybrid approach, combining the strengths of time series analysis and econometric modeling. Initially, we will gather historical data, encompassing the daily closing values of the ATX, alongside a comprehensive set of macroeconomic indicators. These include, but are not limited to, inflation rates, interest rates (specifically the Euro Interbank Offered Rate or EURIBOR), industrial production indices for Austria and the Eurozone, consumer confidence indices, unemployment rates, and relevant international market data such as the DAX index performance, commodity prices (particularly those related to Austria's key export sectors, such as steel and machinery), and currency exchange rates (EUR/USD and EUR/CHF). Data preprocessing will involve cleaning missing values, handling outliers, and standardizing the input variables to ensure data consistency and improve model performance. The dataset will be split into training, validation, and testing sets, typically in a 70-15-15 ratio.

The core of our model will leverage a recurrent neural network (RNN) architecture, specifically a Long Short-Term Memory (LSTM) network, due to its proficiency in handling time-dependent data. This network will be trained on the historical ATX data and macroeconomic indicators, enabling it to learn complex patterns and dependencies. Simultaneously, we will incorporate an econometric model, such as a Vector Autoregression (VAR) model or a similar model, to capture the linear relationships among the macroeconomic variables and their impact on the ATX. The LSTM model's predictions will then be adjusted, or "calibrated," using the output of the econometric model to provide a more refined and accurate forecast. The calibration process will involve techniques such as ensemble methods or regression models, in which the econometric model's predictions are used as input features to improve LSTM model accuracy.

Model evaluation will be rigorous and multifaceted. Performance will be assessed using a combination of metrics, including Mean Absolute Error (MAE), Mean Squared Error (MSE), Root Mean Squared Error (RMSE), and the R-squared coefficient. We will conduct backtesting on the test dataset to simulate real-world forecasting scenarios and analyze the model's performance across different market conditions, including periods of volatility and periods of relative stability. Regular model retraining and parameter tuning will be performed to adapt to changing market dynamics and economic conditions. Additionally, we will conduct sensitivity analysis to determine the impact of each input variable on the model's output, allowing for a better understanding of the factors driving ATX fluctuations. The final model will provide both point forecasts and confidence intervals to reflect the inherent uncertainty in market prediction, offering valuable insights for investment decisions.

ML Model Testing

F(Factor)^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(Statistical Inference (ML))^3,4,5 X S(n):→ 6 Month $\sum _{i=1}^n\left(a_i\right)$

n:Time series to forecast

p:Price signals of ATX index

j:Nash equilibria (Neural Network)

k:Dominated move of ATX index holders

a:Best response for ATX 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?

ATX 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%

ATX Index: Financial Outlook and Forecast

The Austrian Traded Index (ATX) is a bellwether for the Austrian economy and a crucial indicator for investors. Its financial outlook is intrinsically linked to both domestic economic performance and international market dynamics. Currently, several factors suggest a nuanced outlook. Austria's economy is moderately exposed to the European Union's economic health, with fluctuations in the Eurozone having a direct impact on domestic industries, particularly in manufacturing and exports. The country is also significantly influenced by geopolitical stability, given its location in Central Europe and its relationships with bordering nations. Inflation, although receding from its peak, remains a concern, necessitating cautious monetary policy interventions by the European Central Bank (ECB) which influences the financial environment for the ATX-listed companies. Furthermore, shifts in consumer spending, technological advancements, and sustainable practices are reshaping the operational landscape for a multitude of companies, demanding strategic adaptation.

Analyzing sector-specific trends provides further clarity. The banking sector, a cornerstone of the ATX, is under scrutiny due to the ongoing challenges within the European banking system and the impact of interest rate movements. The energy sector, heavily reliant on international energy prices and geopolitical stability, remains volatile. Industrials, a significant component of the index, are susceptible to global supply chain disruptions and demand fluctuations. Additionally, the technology sector, although relatively smaller within the ATX compared to other major indices, is experiencing a period of growth driven by digitalization and innovation. The performance of these sectors, coupled with corporate earnings reports, dividend payouts, and investment strategies, will significantly shape the ATX's movement. Investors are closely monitoring government regulations and reforms impacting areas like taxation, environmental policies, and labor laws, all which influence business confidence and investment decisions.

External factors continue to play an important role in shaping the ATX's financial outlook. The overall global economic growth, influenced by major economies such as the United States and China, will affect the export-oriented Austrian companies. Fluctuations in the value of the Euro relative to other currencies directly impact the competitiveness of Austrian exports, which can boost or undermine the financial results of companies listed on the ATX. Market sentiment, driven by investor confidence and risk appetite, influences trading volumes and price movements. Geopolitical tensions and unforeseen events, such as political instability or economic downturns in key trading partners, can generate market volatility. The evolution of environmental, social, and governance (ESG) standards has placed increased focus on the sustainability practices of companies. The investor community increasingly favors businesses demonstrating commitment to ethical and responsible business practices, which may affect company valuations and attract investments.

Overall, the ATX's outlook appears cautiously optimistic. A moderate growth trajectory is anticipated, provided global economic conditions remain stable and inflationary pressures continue to ease. The successful adaptation of Austrian companies to the changing economic landscape, coupled with effective government policies, will bolster this positive forecast. However, significant risks could derail this positive trajectory. A sharp economic downturn in Europe or a resurgence of inflation could negatively impact corporate earnings and investor confidence. Geopolitical instability and heightened trade tensions represent significant threats. Unexpected domestic policy changes, such as tax increases or regulatory hurdles, could also hinder growth. Therefore, the ATX's future performance will depend on the interplay of numerous internal and external factors, requiring investors to adopt a proactive and adaptable approach to navigate the market successfully.

Rating	Short-Term	Long-Term Senior
Outlook	Ba2	Ba2
Income Statement	Baa2	Ba3
Balance Sheet	Baa2	Baa2
Leverage Ratios	Baa2	Baa2
Cash Flow	B2	B1
Rates of Return and Profitability	B1	B2

*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?

References

1. Hoerl AE, Kennard RW. 1970. Ridge regression: biased estimation for nonorthogonal problems. Technometrics 12:55–67
2. G. J. Laurent, L. Matignon, and N. L. Fort-Piat. The world of independent learners is not Markovian. Int. J. Know.-Based Intell. Eng. Syst., 15(1):55–64, 2011
3. J. Hu and M. P. Wellman. Nash q-learning for general-sum stochastic games. Journal of Machine Learning Research, 4:1039–1069, 2003.
4. Bessler, D. A. T. Covey (1991), "Cointegration: Some results on U.S. cattle prices," Journal of Futures Markets, 11, 461–474.
5. LeCun Y, Bengio Y, Hinton G. 2015. Deep learning. Nature 521:436–44
6. Jorgenson, D.W., Weitzman, M.L., ZXhang, Y.X., Haxo, Y.M. and Mat, Y.X., 2023. Apple's Stock Price: How News Affects Volatility. AC Investment Research Journal, 220(44).
7. Kallus N. 2017. Balanced policy evaluation and learning. arXiv:1705.07384 [stat.ML]