Index Forecasting through Machine Learning Algorithm in Pakistan Stock Exchange.

Abstract

With the exponential rise in the usage of AI-based technology like machine learning, the traditional ways of doing business are undergoing paradigm change quickly. To survive for the businesses and entrepreneurs alike in these modern times, it is imperative to understand and accept the impact of technology. Subsequently, the same should be adopted in the daily practice of life and industry. For investors of equity, the future of stock markets has always been of utmost interest. While following the traditional EMH theory and random walk hypothesis, predicting the future is not possible or feasible. However, with the increasing usage of supervised learning technique-based algorithms, more and more applications are emerging on the horizon that utilizes these algorithms predicting powers to determine various outcomes in risk, medical, behavior, etc. The study aims to utilize the supervised learning algorithms to analyze the possibility of index prediction in the Pakistan Stock Exchange based on the PSX index data of the ten years. This research will prove to be extremely helpful for finance, equity investors, and academia as it will explore in-depth how to utilize scientific methods to solve investment-related issues.