Forecasting and Risk Modelling | Report

0Running head: FORECASTING AND RISK MODELLING
Forecasting and risk modelling
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1FORECASTING AND RISK MODELLING
Executive summary
In the finance and economics study, stock prediction is an essential factor for the interest
of the researchers and to make various predictive models. In this research paper the
Autoregrassive integrated moving average, ARMA model has been incorporated for the time
series prediction. This paper also represents the predictive model for the stock price expectation
by using the ARMA method. For this Eviews software is used to analyse the data. The stock has
been selected that is Wells fargo listed in NYSE, Newyork Stock Exchange. Data is extracted
from the Bloomberg database. The consequence that are so obtained from ARMA model, which
has a robust and potential prediction in a short term basis is so favaorable with the existing
mechanism.

2FORECASTING AND RISK MODELLING
Table of Contents
Introduction......................................................................................................................................3
Overview of the stock......................................................................................................................4
Business keep stagecoach rolling....................................................................................................4
Wells fargo earnings........................................................................................................................4
Stock analysis of Wells Fargo.........................................................................................................5
A boosts in WFC stock....................................................................................................................6
Rating of Wells Fargo stock............................................................................................................7
Reason of decreasing:......................................................................................................................7
Recovery from the current crisis scenario.......................................................................................7
Welss Fargo- Value invest stock?....................................................................................................8
PE ratio............................................................................................................................................8
Bottom line....................................................................................................................................10
Literature review............................................................................................................................11
Testing and ensuring stationary.....................................................................................................12
Identification of p and q.................................................................................................................13
Estimation and Forecasting............................................................................................................13
Optimal ARMA with a stationary error term................................................................................15
Optimal ARMA with EGARCH model.........................................................................................16

3FORECASTING AND RISK MODELLING
Out of sample forecasting..............................................................................................................18
Fitted values...................................................................................................................................20
Conclusion:....................................................................................................................................21
Reference.......................................................................................................................................22

4FORECASTING AND RISK MODELLING
Introduction
This paper study about a stock listed on New York Stock Exchange (NYSE), Wells
Fargo. The primary goals of this paper is to investigate the possible investment oppertunitiers,
logically worth of the takis risk and benefits and make an educated investment position. A
critical analysation of understanding the risk and opportunities for high return which is offered in
the investment opportunity through the effortless research and analysis. The derive knowledge
from this paper is to guide the future selection and implimentation of intelligent investment.
A 10 years daily data has been used for the investment purpose this investments tested
several researched and also help in understanding of the stock market in general. Through this
study experience identify and anticipates the market trends and influenced the future investment
decision.
This paper also analyse the statistical analysis of time series, auto regressive moving
average, ARMA model (Isufi et al 2016), it provides a report of a weekly stochastic process in
terms of two polynomials, one for the autoregression (Efendi, Arbaiy and Deris 2018) and
another for the moving average. Generally it is reported in this paper that can be done from two
perspectives: statistical and artificial intelligence techniques (Raedt et al 2016). It is also known
to a robust and efficient “financial time series” allows to forecast short term prediction than the
most popular ANN techniques. In this paper a short term stock price prediction process
(Rounaghi and Zadeh 2016) has been presented by ARMA model. By refering this reserach
paper an investor must evaluate a short term prediction that leads an investment decision making.

5FORECASTING AND RISK MODELLING
Overview of the stock
Wells fargo and Company is an american and multinational financial services
organizations, which having the headquarter in San Fransisco, in the context of full market
capitalization, Wells fargo is the fourth largest bank. It is listed on the New York Stock
exchange.
There are several reasons to choose this stock-
Business keep stagecoach rolling
In case of community banking (Lux and Greene 2015), it serves the consumers and the
small enterprises, savings account and as well as credit and debit cards.
Wells fargo earnings
In the fourth quarter, Well Fargo received 60 cents per share or 93 cents when leagal
costs are excluded. It has dropped 23% year on year as per the next revealing data. Therefor the
stock has managed to post revenue of 19.9 dollar, which was better than the expected $19.81
billion.
A revenue fell around 8% of the community banking, that is all about to &10.52 biolion
which is driven by the lower interest income. Wholesale banking revenue droped 5% to 6.56
billion dollar. Wealth and investment management (Hastings and Mitchell 2020) revenue grew
3% to 4.07 billion dollar.