Advanced Business Analytics

Submitted by
Group-9
Reshma Majumder
Raj Ratan Soren
Deeksha Sharma
Pooja Gupta
Gopal singh

A stock market, equity market or share market is the aggregation of buyers and sellers (a
loose network of economic transactions, not a physical facility or discrete entity) of stocks
(also called shares), which represent ownership claims on businesses; these may include
securities listed on a public stock exchange, as well as stock that is only traded privately.
Examples of the latter include shares of private companies which are sold to investors
through equity crowdfunding platforms. Stock exchanges list shares of common equity as
well as other security types, e.g. corporate bonds and convertible bonds.
Function and purpose: The stock market is one of the most important ways for companies
to raise money, along with debt markets which are generally more imposing but do not
trade publicly. This allows businesses to be publicly traded, and raise additional financial
capital for expansion by selling shares of ownership of the company in a public market. The
liquidity that an exchange affords the investors enables their holders to quickly and easily
sell securities. This is an attractive feature of investing in stocks, compared to other less
liquid investments such as property and other immoveable assets.
Introduction: Stock Market prediction and analysis is the act of trying to determine the
future value of a company stock or other financial instrument traded on an exchange. Stock
market is the important part of economy of the country and plays a vital role in the growth
of the industry and commerce of the country that eventually affects the economy of the
country. Both investors and industry are involved in stock market and wants to know
whether some stock will rise or fall over certain period of time. The stock market is the
primary source for any company to raise funds for business expansions. It is based on the
concept of demand and supply. If the demand for a company's stock is higher, then the
company share price increases and if the demand for company's stock is low then the
company share price decrease. Another motivation for research in this field is that it
possesses many theoretical and experimental challenges. The most important of these is the
Efficient Market Hypothesis(EMH), the hypothesis says that in an efficient market , stock
market prices fully reflect available information about the market and its constituents and
thus any opportunity of earning excess profit ceases to exist. One of the example of big
exchange is New York Stock Exchange.
Problem Statement: Stock Prices are very noisy. It is very challenging to predict the stock
price of the firm. We have taken the stock price data of TATA MOTORS to predict their
future stock price.
Techniques Used: 1) Seasonal Trend Decomposition using Loess (STL) Method
2) ARIMAX

Platform Used: R
Seasonal Trend Decomposition in R: The Seasonal Trend Decomposition using Loess (STL) is
an algorithm that was developed to help to divide up a time series into three components
namely: the trend, seasonality and remainder. The methodology was presented by Robert
Cleveland, William Cleveland, Jean McRae and Irma Terpenning in the Journal of Official
Statistics in 1990. The STL is available within R via the STL function.

R Script:

Results & Analysis:

head() function returns the first or last parts of a vector, matrix, table, data frame or
function.
The function “ts” is used to create time-series objects. These are vectors or matrices
with class of "ts" (and additional attributes) which represent data which has been
sampled at equispaced points in time. In the matrix case, each column of the matrix
data is assumed to contain a single (univariate) time series. Time series must have at
least one observation, and although they need not be numeric there is very limited
support for non-numeric series.
Plotting stock value:
The Decompose function first determines the trend component using a moving average (if
filter is NULL, a symmetric window with equal weights is used), and removes it from the
time series. Then, the seasonal figure is computed by averaging, for each time unit, over all
periods. The seasonal figure is then centered. Finally, the error component is determined by
removing trend and seasonal figure (recycled as needed) from the original time series.

Forecasting using stl:

Comparison between STL and ARIMAX:
STL has several advantages over the classical decomposition method and ARIMAX.Unlike
ARIMA, STL will handle any type of seasonality, not only monthly and quarterly data. The
seasonal component is allowed to change over time, and the rate of change can be
controlled by the user. The smoothness of the trend-cycle can also be controlled by the
user. It can be robust to outliers (i.e., the user can specify a robust decomposition). So
occasional unusual observations will not affect the estimates of the trend-cycle and
seasonal components. They will, however, affect the remainder component. On the other
hand, STL has some disadvantages. In particular, it does not automatically handle trading
day or calendar variation, and it only provides facilities for additive decompositions.
So STL can deal with phenomena such as multiple seasonality, high-frequency seasonality
(e.g. 365 for daily data) and cycles. However, if you have daily data you can go for a model
which tackles the thematic of multiple seasonality, e.g. TBATS instead of STL. If you have
many multiple seasonality and millions or billions of observations you can go for data-savvy
complex models such as recurrent neural nets. STL might be a useful approach for modelling
business cycles. In a business cycle not every cycle has exact the same length, but they are
rather an irregularly recurring phenomenon. Sometimes recession might last 2 years and
sometimes it might last 5 or 6. STL is more able to capture this kind of uncertainty than
ARIMAX. Also if you cannot make your data stationary STL will be more useful than ARIMAX.
ARIMAX requires the data to be stationary or at least to be stationary in differences