Artificial Neural Network (ANN): Why You Should Care

Yu YaoThis Artificial Neural Network (ANN) article was written by Yu Yao – Financial Analyst at I Know First.

Summary

  • Understand what is Artificial Neural Network (ANN) and how it works.
  • What are the applications of ANN in the real world.
  • How I Know First implements ANN and find the most promising investment opportunities.

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Hedge and Safe Haven Financial Assets

Sergey Okun  This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.

Summary:

  • Gold, short-term treasury bills, long-term treasury bonds, the spread between the long-term treasury and corporate bonds, 5-month volatility, and 1-month volatility are uncorrelated or negatively correlated with the S&P500 making them good candidates for a role of a hedge asset.
  • 5-month and 1-month volatility as exchange trade products, and also the short-term government bills and long-term government bonds able to play a role of a safe haven asset.
  • Correlation analysis of the S&P500 and TNX shows that the correlation structure is not consistent from data frame to data frame.

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Market Efficiency: Testing Random Walk by the Runs Test and the Variance Ratio Test

Sergey Okun  This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.

Summary:

  • The stock market is not efficient which leaves a place to beat the market in a systematic way.
  • The market efficiency can be different from time to time, and the hypothesis of Random Walk cannot be rejected for some periods.
  • The I Know First AI algorithm provides us with the tool to select the most promising stocks in the chaotic market.

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VaR Estimation: Condition Shortfall

Sergey Okun  This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.

Summary:

  • VaR does not provide insight into what losses might occur if the situation is worse than the threshold that we assume.
  • The Expected Shortfall method enables us to estimate the amount of tail risk an investment portfolio has.
  • The I Know First AI algorithm provides us with the tool to select the most promising stocks.

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VaR Estimation: Variance-Covariance and Historical Simulation Methods

Sergey Okun  This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.

Summary:

  • VaR allows us to estimate possible financial losses in different scenarios.
  • Historical Simulation VaR provides us with a significantly different result from the respective Variance-Covariance VaR for very high confidence intervals which depends on the normality assumption.
  • The I Know First AI algorithm provides us with the tool to select the most promising stocks.

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Portfolio Construction Based on High Moment Distribution Parameters

Sergey Okun  This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.

Summary:

  • Investors are differentiated according to different risk-taking levels, which leads to the existence of different portfolios taking into account investor preferences.
  • The four moments utility function enables us to construct portfolios taking into account investors' preferences about risk-aversion.
  • I Know First provides different forecast packages which allow us to select the most promising stocks for portfolio optimization.

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IKF Algorithm: Application Tips

I Know First Research Team LogoThis article was written by the I Know First Research Team.

Summary:

  • The use of mathematics and algorithms eliminates a big problem that all of us share, being emotional.
  • IKF provides an efficient AI algorithm for finding promising financial assets.
  • There are several tips that allow us to correctly interpret the output of the IKF algorithm

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Portfolio Construction Based on Fundamental Ratios

Sergey Okun  This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.

Summary:

  • Relative valuation is one of the basic concepts of stock evaluation that allows to determine undervalued stocks.
  • The Treynor-Black model allows to construct a portfolio with active and passive investment parts.
  • I Know First provides the Fundamental Stocks Package based on the AI algorithm which allows to select of the most promising stocks based on the fundamental criteria.

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