Sharda University (School of Business Studies)

Greater Noida
Department of Business Analytics

2019-21
A

Project Report on

“Netflix Stock Market Forecasting Using Time Series

Analysis”

A Dissertation submitted to

Sharda University, Greater Noida (201306)

In partial fulfillment for the award of the Master of Business Administration In

Business Analytics

Submitted To: - Submitted By: -

Department of Business Analytics Divyani Mandle
SHARDA UNIVERSITY, GREATER NOIDA-201306
SCHOOL OF BUSINESS STUDIES

2019-2021

CERTIFICATE

This is to certify that the Dissertation work entitled “Netflix Stock Market Forecasting Using
Time Series Analysis” submitted by “Divyani Mandle” student of final year MBA in the year
2019 -2021 of Information Technology and Business Analytics Department of this university, is
a satisfactory account of her work based on syllabus which is approved for the awards of degree
of Master of Business Administration in Business Analytics.

External Examiner
Internal Examiner
Date:
Date:
 (i)

DECLARATION BY THE STUDENT

I hereby declare that “Netflix Stock Market Forecasting Using Time Series Analysis” is the
result of the project work carried out by me under the guidance of Dr. ATUL SANGAL in partial
fulfillment for the award of Master’s Degree in Business Administration by Sharda University. I
also declare that this project is the outcome of my own efforts and that it has not been submitted
to any other University or Institute for the award of any other degree or Diploma or Certificate.

Place: Greater Noida

Name: Divyani Mandle

System Id: 2019004162
 (ii)
ACKNOWLEDGEMENT

I have taken efforts in this project. However, it would not have been possible without the
kind support and help from various people who gave me such attention and time; I would
like to extend my sincere thanks to all of them who help me throughout the Project. I
would like to thank with Immense Gratitude to Dr. Atul Sangal Associate Professor and
HOD, IT&BA permitted to undertake this Project work.

And I would like to express my gratitude towards my parents and friends for their kind
cooperation and encouragement which help me in completion of this project.

Name: Divyani Mandle

Sys Id: 2019004162
 (iii)

Preface

This report has been prepared as part of my grand project, as a part of MBA. The report is
prepared with the view to include all the details regarding the project that I carried out.

The main aim of time series modeling is to carefully collect and rigorously study the past
observations of a time series to develop an appropriate model which describes the
inherent structure of the series. This model is then used to generate future values for the
series .Time series forecasting thus can be termed as the act of predicting the future by
understanding the past.
 (iv)

Table of Contents
Page No.
Certificate (from the faculty mentor) i
Author‘s Declaration ii
Acknowledgement iii
Preface iv

Chapter1: Overview (1-3)

1.1 Introduction 1
1.2 What is Time Series Data? 1
1.3 Time series analysis v/s time series forecasting 1
1.4 Stock Market 2
1.5 Definition of stock 2
1.6 How does stock exchange work? 3
1.7 How Share Prices are Set 3

Chapter 2: Company Overview (4-13)

2.1 Company Description 4
2.2 Business Fragments 6
2.3 Products 8
2.4 Company Growth Evolution 9
2.5 Cost Structure, Main Assets and Liabilities 10
2.6 Capital Structure Analysis 10
2.7 Stock Information 11
2.8 Netflix within the industry 12

Chapter 3: Literature Review 14

Chapter 4: Research Methodology 15

4.1 Objectives 15
4.1.1Technical Objective 15
4.2 Scope 15
4.3 Research Design 15
4.3.1 Descriptive Research Design 15
4.4 Sources of Data Collection 15
4.4.1 Secondary source of Data 15
Chapter 5: Data Analysis 17
5.1 Autocorrelation 18
5.2 Trend Lines 20
5.3 Trend Analysis 20
5.3.1 Types of Trend 21
5.3.2 Use in Technical Analysis 22
5.4 Exponential Regression 24
5.5 Durbin Watson 26

Chapter 6: Conclusion 28
6.1 Findings 28
6.2 Suggestions 28
6.3 Limitations 28
6.4 Conclusion 28

Bibliography 30
Appendix 31
Plagiarism Report 32
(v)
1.Overview
1.1 Introduction: Statistic forecasting is used to predict future values supported
previously observed values and one of the only tools for analysis and future
prediction.

1.2 What is time-series data?

It is recorded at regular time intervals, and thus the order of these data points is
significant. Therefore, any predictive model supported statistic data will have time as an
independent variable. The output of a model would be the anticipated value or
classification at a specific time.
Time series data is everywhere, since time could even be a constituent of everything
that's observable. As our world gets increasingly instrumented, sensors and systems are
constantly emitting a relentless stream of a whole series data. Such data has numerous
applications across various industries. Let’s put this in context through some examples.

Time series data are often useful for:

• Tracking daily, hourly, or weekly weather data
• Tracking changes in application performance
• Medical devices to ascertain vitals in real time
• Tracking network logs

1.3 Time series analysis v/s time series forecasting

Let’s mention some possible confusion about the statistic Analysis and Forecasting.
Statistic forecasting may be an example of predictive modeling whereas statistic analysis
is a sort of descriptive modeling.

For a replacement investor general research which is related to the stock or share market
isn't enough to form the choice. The common trend towards the stock exchange among
the society is very risky for investment so most of the people aren't ready to make

1
 decisions supported common trends. The seasonal variance and steady flow of any index
will help both existing and new investors to know and make a choice to take a position
within the share market.
To solve this type of problem statistic forecasting is that the best technique.

Time series analysis are going to be the simplest tool for forecasting the trend or maybe
future. The pattern graph will give sufficient direction to the investor. So allow us to
understand this idea in great detail and use a machine learning technique to forecast
stocks.

1.4 Stock Market

Stock Market is the place where individual and institutional investor near look for and
sell shares during a public setting. Nowadays these exchanges exist as electronic
marketplaces.
That market interest helps decide the value for each security or the sum at which stock
trade members — investors and brokers — will search for or sell.
The idea driving how the stock trade functions is quite straightforward. Operating very
similar to a firm, the stock exchange enables buyers and sellers to barter prices and make
trades.
1.5 Definition of ‘Stock’

2
 A Stock or share (also referred to as a company’s “equity”) may be a financial instrument
that represents ownership during a company.

1.6 How does stock exchange work?

The idea driving how the stock trade functions is quite basic. Working fundamentally the
same as a firm, the stock trade empowers purchasers and venders to deal costs and make
exchanges.
The stock trade works through an organization of trades — you'll have known about the
ny financial exchange, Nasdaq or Sensex. Organizations list portions of their stock on a
trade through a cycle called a first sale of stock or IPO. Investors buy those offers, which
permit the corporate to support cash to develop its business. Investors would then be able
to purchase and sell these stocks among themselves, and thusly the trade tracks the
accessibility and request of each recorded stock.
That organic market helps decide the value for each security or the sum at which stock
trade members — investors and dealers — will look for or sell.

1.7 How Share Prices Are Set

To actually buy shares of a stock on a stock market, investors undergo brokers — an
intermediary trained within the science of stock trading, which can get an investor a stock
at a good price, at a moment’s notice. Investors simply let their broker know what stock
they need, what percentage shares they need, and typically at a general price range. That
is known as a "bid" and makes way for the execution of an exchange. If an investor wants
to sell shares of a stock, they tell their broker what stock to sell, what percentage shares,
and at what price index. That process is named an “offer” or “ask price.”
Foreseeing how the stock trade will perform is one among the chief troublesome things to
attempt to. There are various elements required inside the expectation — actual elements
versus physiological, sane and nonsensical conduct, and so forth Every one of these
viewpoints consolidate to frame share costs unstable and truly hard to foresee with a
serious level of exactness.

3
2. Company Overview

2.1 Company Description

Netflix, Inc. is an American video on request administration settled in Los Gatos,
California, established in 1997 by Reed Hastings and Marc Randolph in Scotts Valley,
California. The organization's essential business is its membership based streaming OTT
service which offers web based spilling of a library of movies and TV programs,
including those delivered in house. As of April 2019, Netflix had more than 148 million
paid memberships around the world, remembering 60 million for the United States, and
more than 154 million memberships absolute including free preliminaries. It is accessible
practically worldwide besides in territory China (because of neighborhood limitations)
just as Syria, North Korea, and Crimea (because of US sanctions). The organization
additionally has workplaces in the Netherlands, Brazil, India, Japan, and South Korea.
Netflix's underlying plan of action included DVD deals and rental via mail, yet Hastings
deserted the deals about a year after the organization's establishing to zero in on the
underlying DVD rental business. Netflix extended its business in 2007 with the
presentation of streaming media while holding the DVD and Blu-beam rental business.
The organization extended globally in 2010 with streaming accessible in Canada, trailed
by Latin America and the Caribbean. Netflix entered the substance creation industry in

4
2012, appearing its first arrangement Lilyhammer. Netflix offers three fundamental sorts
of streaming enrollment plans. Their "essential" plan incorporates admittance to standard
definition quality spilling on a solitary screen at a time. "Standard" plan is their most
famous streaming arrangement and remembers admittance to top notch quality gushing
for two screens simultaneously. "Premium" plan incorporates admittance to top notch and
super top notch quality substance on four screens simultaneously. As of March 31, 2019,
evaluating on all plans ran in the U.S. from $8.99 to $15.99 each month and universally
from the U.S. dollar likeness roughly $3 to $20 each month. Since 2012, Netflix has
taken a greater amount of a functioning job as maker and merchant for both film and TV
arrangement, and keeping that in mind, it offers an assortment of "Netflix Original"
content through its online library.

By January 2016, Netflix administrations worked in excess of 190 nations. Netflix

delivered an expected 126 unique arrangement and movies in 2016, more than some other
organization or link channel. Their endeavors to deliver new substance, secure the rights
for extra substance, and variety through 190 nations have brought about the organization
piling up billions in unpaid liability: $21.9 billion as of September 2017, up from $16.8
billion from the earlier year. $6.5 billion of this is long haul obligation, while the excess
is in long haul commitments. In October 2018, Netflix declared it would bring another $2
billion up owing debtors to help reserve new content.

5
2.2. Business fragments
The Company has three reportable fragments: Domestic streaming, International streaming
and Domestic DVD. The Domestic streaming portion gets incomes from month to month

6
participation charges for administrations identified with streaming substance to individuals in
the United States. The International streaming fragment gets incomes from month to month
enrollment expenses for administrations identified with streaming substance to individuals
outside of the United States. The Domestic DVD section gets incomes from month to month
participation charges for administrations comprising exclusively of DVD-via mail.

7
2.3. Products
Netflix's products incorporate the real time features gave to both Domestic and International
portions and DVD rentals via mail, accessible just in the United States. Streaming substance
incorporates selective and non-restrictive permitting arrangements for membership video-on-
request (SVOD) rights from various providers and unique programming, since 2013. Content
is more centered on TV shows and motion pictures, including an assortment of kinds,
including children's kid's shows, and dialects. Netflix firsts incorporate both substance that is
selective to the organization however not created by it, in which authorizing might be
concurred before the substance is effectively delivered; and self-delivered firsts, which are
created in-house by Netflix and claimed by the organization.
Authorizing bargains are by and large time sensitive and albeit the organization goes after for
multiyear elite rights this isn't generally the situation. Providers incorporate film studios, TV
organizations, merchants and now and again movies and TV shows makers. Contrasts happen
between nations in content accessibility; however Netflix is attempting to progressively get
authorizing bargains on a worldwide premise (Netflix Official Website, 2018a). Non-unique

8
 projects incorporate arrangements with BBC ("Sherlock"), Warner Bros. ("Companions"),
Twenty First Century Fox ("New Girl") and ABC ("Modern Family") (Oaks, 2017).

The diversion network started the incorporation of unique substance in 2013 with the
arrangement "Place of Cards" (Netflix Media Center, 2018) and it was a triumph.

Designated for 53 Emmy grants up until now, the arrangement was granted multiple times.
Netflix is expanding content spend and this expansion is at present more focused a possessed
unique creations given that they offer more authority over content, less dependence on
external studios, and the capacity to reinforce brand esteem (Netflix Letter to investors Q3,
2018). Spending on firsts is along these lines quickly filling in extent of complete spending
(Netflix Official Website, 2018a); be that as it may, in 2017, authorized program actually
addressed over 90% of the organization's substance library (Epstein, 2016).

2.4. Company Growth Evolution

The excursion of Netflix since it was established has been of constant extension and
development. Since 2002, when the organization gave its first sale of stock, yearly incomes
have not quit developing. Incomes didn't rise dramatically after Netflix dispatched its web-
based feature; yet in 2011, one year after it began internationalizing and following four years
of development in the United States, Netflix saw a development of roughly 48% in incomes,
contrasted and the earlier year.
From there on, incomes kept on developing at a lower yet expanding rate. Investigating later
years, paid participation development for the Domestic Streaming Segment has eased back
down (26% development in 2012 and 10% in 2017), while the development for the
International Streaming Segment proceeds above 40%. With respect to the DVD section,
paid enrollments have been diminishing at a yearly normal pace of 17% (thinking about the
most recent three years). Right now, the quantity of paid streaming supporters overall is more
than 130 million and absolute incomes sum 3,999.37 million dollars, as of September 2018.
In any case, the organization has been free-income negative for quite a while and the present
circumstance is required to proceed for certain years more (Netflix Official Website, 2018b).
The hole between net gain and free income happens fundamentally on account of timing
contrasts – cash installments for streaming substance are weighted more forthright

9
 comparative with streaming amortization costs on the Income Statement (Netflix Official
Website, 2018b).

2.5. Cost Structure, Main Assets and Liabilities

Netflix's expenses are primarily of fixed nature. Permitting bargains are typically for a fixed
charge and a characterized window of accessibility and installments request more forthright
money comparative with the cost that is recorded (amortization) (Netflix Official Website,
2018b). Indeed, even creations require certain multi-year responsibilities with outsiders that
are for the most part of long haul fixed expense nature (Netflix Annual Report, 2017).
Expenses with content are expanding for the most part because of the developing
accentuation on claimed firsts and global extension (Netflix Official Website, 2018b) and,
over the most recent three years, working edge went from 4.3% to 7.2%. Netflix's substance
library establishes the primary resource of the organization. When a title is obtained through
authorizing a substance library resource, alongside a substance obligation is recorded on the
asset report. For creations, costs are promoted and sums remembered for non-current
substance resources (Netflix Annual Report, 2017) (Netflix Official Website, 2018b).
Working capital has been consistently certain and it developed this last year. With respect to
the profit from resources proportion, it filled in 2017 which implies that administration is
getting more viable in changing over the put cash into net gain. Other than content liabilities,
the other enormous extent of liabilities has a place with Long-term Debt, which addresses
42% of absolute liabilities. Return on contributed capital expected an estimation of 9.9 in
2017, which is marginally over the current business normal.

2.6. Capital Structure Analysis

As of the second from last quarter of 2018, Netflix tallies with around $8.34 Billion of long
haul obligation. This compares to a Debt to Market Capitalization proportion of 0.685. This
proportion has been expanding, just as Debt to book estimation of Equity and Debt to Total
Assets (which related to 1.81 and 0.34 in 2017, individually). This is in line with the way that
the organization favors giving obligation as opposed to value to fund its substance
speculation. The organization has decided to do so given the current low financing costs, tax
breaks and its low obligation to big business esteem. Last April it brought $1.5 Billion up in

10
 the red, and it is right now wanting to raise a further $2Billion (Netflix Press Release, 2018).
This will prompt a sum of $10 Billion in long haul obligation, and doubtlessly set these
proportions higher. This isn't really downright terrible for financial backers, as the
organization keeps on yielding amazing outcomes; anyway it builds its danger profile: if the
organization doesn't turn income positive before long true to form, it might experience
difficulty paying its commitments. Thinking about this, starting at 2015, Netflix's
dissolvability proportion (which estimates its capacity to meet its commitments dependent on
its incomes) was 2.32%. The proportion improved to 4.09% in 2017; anyway this worth is
still very low. In addition, Netflix had an Interest Coverage Ratio of 2.37 in 2017, which
diminished contrasted with the earlier year. This moderately high worth is a decent sign;
nonetheless, it very well might be disturbing if the proportion diminishes further, on account
of, for instance, financing cost climbs (Sommer, 2018). In any case, the organization
anticipates an improvement in its influence circumstance as Cash Flows draw nearer to Break
Even (Netflix Third Quarter Earnings Call, 2018).

2.7. Stock Information

The normal cost of Netflix's offer somewhat recently was $345. Despite the fact that the cost
is equivalent to a year prior to, it restored 497% to its investors through value appreciation in
the previous five years. S&P 500 record returned 47% in a similar period, while the NASDAQ
Composite returned 78%.

The stock's beta coefficient, which shows how unstable a stock is comparative with the market
addressed by a market list, is 1.58 (three years of month to month costs). It shows that Netflix
is more unpredictable then the market, accordingly a more unsafe speculation. This is genuine
thinking about that Netflix actually doesn't have a stabile plan of action because of huge
money consume on procuring new substance and is yet to be free income positive. It
additionally never delivered profit to this date. Taking a gander at the most utilized valuation
proportion, the cost to-profit proportion (PE proportion), Netflix with this proportion of 129
can be viewed as profoundly esteemed contrasted with its companions (middle PE proportion
of its friends is14). However, this high proportion isn't unforeseen since Netflix is as yet a
high-development story thought about.

11
 700

600

500

400
Open
High
300
Low
Close
200

100

0
1 4 7 1 0 1 3 16 19 2 2 2 5 28 31 3 4 3 7 40 43 4 6 4 9 52 55 5 8 6 1

Netflix Stock market prices time period of 1 year from 2019-2020. Time series graph of
opening, high, low, closing stock price.

2.8. Netflix within the industry

Netflix's fundamental rivals are Amazon Prime Video and Hulu Plus. Hulu Plus is claimed
by 21stcentury FOX, Walt Disney, NBC Universal (an auxiliary of Comcast) and AT&T.
Different Networks like ("CBS All Access"), ("HBO Now") additionally own their own web-
based features. Following this pattern, Disney is additionally on crafted by dispatching its
own web-based feature. YouTube likewise has its own membership based help, "Youtube
TV" and "Youtube Red". Moreover, taking into account that Netflix has globalized its
administration since 2016, it is additionally contending with nearby suppliers from every
country, large numbers of which have a first-mover advantage against the US-based
organization.

Netflix is right now the best part in the SVOD business. This prevalence is particularly note
worthy in the US, where 59% of grown-ups buy in to Netflix. Despite the fact that Amazon
doesn't uncover all data about its Prime Video portion, it is answered to have around 26
million clients in the US (Plaugic, 2018). Despite the fact that the organization works
worldwide, its prominence is still behind Netflix's.

Regardless, there are a few business sectors where Amazon has a higher piece of the overall
industry, like Germany, India, Japan and Brazil (Roshan, 2018).

12
Hulu was accounted for to have around 17 million US supporters in 2017. Indeed, even
though the organization's prevalence has been expanding, it actually has a low supporter base
contrasted with Netflix. Other than this, Hulu isn't accessible universally. Concerning HBO,
it is accessible in a few districts of the world, however not universally. Taking a gander at
YouTube, its superior help is still at a beginning phase: YouTube TV just checks with
800,000 endorsers, and is just accessible in the US (Anon, 2018).

The organization likewise contends by implication with different types of media and
amusement. There are other advanced video choices, for example, the standard YouTube
stage. Also, the organization will continue to contend with satellite TV, as numerous families
are not prepared to "cut the string" right now. This turns out to be especially basic
considering the numerous people who appreciate watching the news or live stream sports
(something Netflix isn't keen on offering) (Netflix Third Quarter Earnings Call, 2017). In
addition, Netflix is likewise rivaling gratis other options, given that it is generally simple for
people to get to content through theft. This holds particularly obvious in developing business
sectors: in Colombia and Mexico, for example, more than 75% of purchasers are accounted
for to watch pilfered content, as per Statist (2017)

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3.Literature Review
A Stock Market could be a position of high premium to the investors since it gives them an
opportunity to adapt monetarily by money their assets on offers and subordinates of
changed firms. It’s a may be framework; that implies the action qualities of stock costs
territory unit unusual and uncertain. To make some style of feeling of this tumultuous
conduct, specialists had to look out a way which may assess the consequence of this
vulnerability to the progression of offer expenses. From the examinations of differed
applied number related models, Artificial Neural Networks territory unit similar to non-
parametric, nonlinear, relapse models. Thus, Artificial Neural Networks (ANN) really can
possibly differentiate obscure and covered up designs in data which might be horribly
powerful for share market expectation.

On the off chance that effective, will this will this could this may} be helpful for investors
and funds which can totally add to the economy. There are unit very surprising procedures
that are applied in order to anticipate Share Market returns. The protections market mirrors
the vacillation of the economy, and gets 10 million investors‟ considerations since its
underlying turn of events. The protections market is described by terrible, high return,
along these lines financial backers are included concerning the investigation of the
protections market and making an endeavor to estimate the pattern of the protections
market. Notwithstanding, protections market is wedged by the governmental issues,
economy and a lot of various elements, not to mention the nature of its inward law, similar
to esteem (stock file) changes inside the non-direct, and shares information with high
commotion qualities, so the ordinary numerical applied math methods to gauge the
protections market has not yielded acceptable outcomes.

Neural organizations will rough any high level non-direct relations and has strength and
flaw open minded alternatives. Subsequently, it's appallingly proper for the examination of
stock information. In many neural organization models that were recommends, specialists
as a rule utilize the bounce garden organization. Jump garden network is that the
commonest input network model, it's one among the models that ordinarily concentrated at
present. The bounce garden network is that the mono layer perceived by a comparable
vegetative cell, and is also an evenly associated acquainted organization while not learning
works.

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4. Research Methodology
4.1. Objectives
In the past decades, there's an increasing interest in predicting markets among
economists, policymakers, academics and market makers. The target of the proposed
work is to review and improve the supervised learning algorithms to predict the stock
price.
4.1.1. Technical Objective The technical objectives are going to be implemented in
Minitab. The system must be ready to access an inventory of historical prices. It must
calculate the estimated price of stock supported the historical data. It must also provide
an instant visualization of the market index.

4.2. Scope
Analysis of stocks using data processing are going to be useful for brand spanking new
investors to take a position available market supported the varied factors considered by
the software.

4.3. Research Design

Exploration configuration indicates the techniques and systems for leading a specific
report. An examination configuration is the course of action of conditions for assortment
and investigation of the information in a way that expects to consolidate significance to
their inquiry reason with economy in methodology. The kind of examination plan which
has been taken into this task is Descriptive Research Design.

4.3.1 Descriptive Research Design

Descriptive research studies are those investigations which are worried about depicted the
attributes of specific person. In enlightening just as in symptomatic investigations, the
analyst should have the option to characterize unmistakably, we needs to quantify and
should discover satisfactory strategies for estimating it alongside an obvious meaning of
populace. Need to examine. Since the point is to acquire total and precise data in it. Said
examines, the strategy to be utilized should be painstakingly arranged. The examination
configuration should make sufficient arrangement for insurance against inclination and
should augment dependability, with due worry for the affordable finish of the exploration
study.

4.4 Sources of Data Collection

4.4.1 Secondary source of Data

Another source of data which was used was the secondary source, about depicted the
attributes of specific person. In enlightening just as in symptomatic investigations, the

15
analyst should have the option to characterize unmistakably, we needs to quantify and
should discover satisfactory strategies for estimating it alongside an obvious meaning of
populace. Need to examine. Since the point is to acquire total and precise data in it. Said
examines, the strategy to be utilized should be painstakingly arranged. The examination
configuration should make sufficient arrangement for insurance against inclination and
should augment dependability, with due worry for the affordable finish of the exploration
study.

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5.Data Analysis

I took the dataset of Netflix Stock market prices time period of 5 years from 2016-2020. Plotting
Time series graph of opening, high, low, closing stock price.

(i). Plot the series

700

600

500

400
Open
High
300
Low
Close
200

100

0
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61

(ii)Comment, is your time series stationary or not?

Closing stock value for forecasting:

Close(y)
600

500

400
Close(y)
300

200

100

0
1 5 9 13 1 7 21 2 5 29 3 3 37 41 4 5 49 5 3 57 6 1

17
 We can clearly see from graph that there is some kind of trend. To demonstrate it numerically we
do autocorrelation.

5.1. Autocorrelation
Autocorrelation may be a mathematical representation of the degree of similarity between a
given statistic and a lagged version of itself over successive time intervals. It is an equivalent as
calculating the correlation between two different statistics, except autocorrelation uses an
equivalent statistic twice: once in its original form and once lagged one or more time periods.

Autocorrelation also can be mentioned as lagged correlation or serial correlation, because it

measures the connection between a variable's current value and its past values. When computing
autocorrelation, the resulting output can range from 1 to negative 1, in line with the normal
correlation statistic. n autocorrelation of +1 addresses an ideal direct relationship (an expansion
seen in only one event arrangement brings about a proportionate increment inside the other time
arrangement). An autocorrelation of negative 1, on the contrary hand, addresses amazing
circuitous relationship (an increment seen in only one event arrangement prompts a proportionate
decline inside the other time arrangement). Autocorrelation measures linear relationships; albeit
the autocorrelation is minuscule, there should be a nonlinear relationship between a statistic and
a lagged version of itself.

Autocorrelation can be valuable for specialized investigation, which is generally worried about
the patterns of, and connections between, security costs utilizing outlining strategies rather than
an organization's monetary wellbeing or the executives. Specialized experts can utilize
autocorrelation to perceive the amount of an effect past costs for a security have on its future
cost.

Autocorrelation can show if there is a force factor related with a stock. For instance, if financial
backers realize that a stock has a generally high certain autocorrelation worth and they witness it
making sizable additions in the course of recent days, at that point they may sensibly anticipate
the developments over the forthcoming a few days (the main time arrangement) to coordinate
with those of the slacking time arrangement and to move upward.

Autocorrelations
Lag ACF T LBQ
1 0.942556 7.36 56.90
2 0.874619 4.10 106.73
3 0.803557 3.02 149.51
4 0.723005 2.39 184.76
5 0.650634 1.97 213.81
6 0.581759 1.66 237.45

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 7 0.532153 1.45 257.61
8 0.478695 1.27 274.22
9 0.433525 1.12 288.11
10 0.391468 0.99 299.66
11 0.348938 0.87 309.02
12 0.319028 0.78 317.00
13 0.284913 0.69 323.50
14 0.258345 0.62 328.96
15 0.237063 0.57 333.65

 Higher estimation of ACF (more like 1) implies there is auto connection up to lag
15. Here we have ACF esteem is 0.942556 which means it is highly correlated
any there is a trend.

 T value: Significance level 95%, Degree of opportunity (n-1), 14 = -

2.145<7.36< 2.145 it reject the hypothesis which implies that data is Horizontal.

 If Q > chi square we Reject Hypothesis or if Q < chi Square we Accept

Hypothesis, here we have Q = 333.65and chi square of 2 Degree of opportunity

19
 59.335, 59.335> 56.90 it reject the hypothesis that there is no autocorrelation, this
implies there is autocorrelation the dataset isn't arbitrary. We can conclude that
data has trend.
Time series is not stationary.

5.2. Trend Lines

Trend lines are effectively conspicuous lines that traders draw on charts to interface a
progression of costs together. The subsequent line is then used to give the traders a smart
thought of the bearing in which a investment's value might move.

Close(y)
600
f(x) = 93.19 exp( 0.03 x )
500 R² = 0.88
400
Close(y)
300 Exponential (Close(y))

200

100

0
1 6 11 16 2 1 26 3 1 36 41 4 6 51 5 6 6 1

The close stock price shows an increasing Non-linearly with increasing variability.

Exponential value of R sq = 0.877

Linear Trend value of R sq = 0.870

Quadratic Trend Value of R sq= 0.871

R sq of exponential is more as compare to other. Hence, we can say it is best fit.

5.3. Trend Analysis:

Trend analysis is an analysis of the trend of the corporate by comparing its financial statements
to research the trend of market or analysis of the longer term on the idea of results of past
performance and it’s an effort to form the simplest decisions on the idea of results of the analysis
done.

Trend analysis involves collecting the knowledge from multiple periods and plotting the
collected information on the horizontal line with the target of finding actionable patterns from

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 the given information. In Finance, analysis is employed for Technical analysis and Accounting
analysis of stocks.

5.3.1 Types of Trend

1 – Uptrend
An uptrend or bull market is when monetary business sectors and resources – like the more
extensive economy level – move inside the upward bearings and continue to expand costs of the
stock or the resources or perhaps the elements of the economy over the sum. It’s a time of
booming where jobs get created, the economy moves into a positive market, and sentiments
within the markets are favorable, and therefore the investment cycle has started.
2 – Downtrend
A downtrend or bear market is when monetary business sectors and resources – like the broader
economy level – move within the downward direction and costs of the stock or the assets or
maybe the dimensions of the economy keep it up decreasing over time. It’s the time when
companies pack up the operation or shrink the assembly thanks to a slump in sales. Jobs are lost,
and asset prices start declining, sentiment within the market isn't favorable for further
investment, investors run the haven of the investment.

3 – Sideways / horizontal Trend

A sideways/horizontal trend means assets prices or share prices – as with the broader economy
level – are not moving in any direction; they are moving sideways, up for some time, then down
for some time. The direction of the trend cannot be decided. It is the trend where investors are
worried about their investment, and therefore the government is trying to push the economy
within the uptrend. Generally, the sideways or horizontal trend is taken into account risky
because when sentiments are going to be turned against can't be predicted; hence investor
attempt to prevent in such a situation.

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 5.3.2. Use in Technical Analysis

An investor can create his trend line from the historical stock prices, and he can use this
information to predict the future movement of the stock price. The trend can be associated with
the given information. Cause and effect relationships must be studied before taking concluding
the trend analysis.

Trend analysis additionally includes discovering designs that are happening after some time,
similar to a cup and handle example, head and shoulder example or opposite head and shoulder
design.
In specialized examination, it tends to be utilized in the unfamiliar trade market, securities
exchange. In specialized examination, it tends to be utilized in the unfamiliar trade market,
securities exchange, or subsidiary market or subsidiary market. With slight changes, an
equivalent analysis is often utilized in all markets.

And By doing Trend Analysis we found that exponential gives us less Mape as compare to other two.

(iv). Extend the trend line to produce five period forecasts

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 f(x) = NaN exp( NaN x )
R² = NaN
Close
12

10

8
Close
Exponential (Close)
6

0
0 2 4 6 8 10 12

(V) Use trend line equation to calculate trend values and produce five period forecasts

For Exponential curve Forecast equation y’ (n + p) = beta0*beta1^ (n+p)

Where n, n = last no. of period, p = period (1,2,3….) and beta0 =93.19463365

beta1 = 1.029739906

Period Forecast [beta0*beta1^ (n+p)]

62
573.454

63 590.5085

64 608.0702

65 626.1541

66
644.7759

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5.4. Exponential Regression
In some cases linear regression can be utilized with connections that are not naturally direct, yet can be
made to be direct after a change. Specifically, we think about the accompanying remarkable model:

Taking the natural log of both sides of the equation, we have the following equivalent equation:

This equation has the form of a linear regression model:

Where ε, error term 

Observation: Since αeβ(x+1) = αeβx  · eβ, we note that an increase in x of 1 unit results in y being
multiplied by eβ.

(vi). Calculate intercept and slope of the trend line and then produce five period forecasts
Beta0: Intercept = b=log(y) = 10^b=10^1.969390905 = 93.194

Beta1: Slope (beta1) = m = log(y) = 10^m=10^0.012727544 =1.029

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Forecast [Yt = 93.1946* (1.02974^t)]

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5.5. Durbin Watson Statistic:
The Durbin Watson Test is a proportion of autocorrelation (likewise called sequential
relationship) in residuals from relapse investigation. Autocorrelation is the similitude of a period
arrangement throughout progressive time stretches. It can prompt disparage of the standard
blunder and can make you think indicators are critical when they are definitely not. The Durbin
Watson test searches for a particular kind of sequential relationship, the AR(1) measure.

The Hypotheses for the Durbin Watson test are:

H0 = no first request autocorrelation.

H1 = first request relationship exists.

(For a first request relationship, the slack is one time unit).

Suspicions are:

• That the mistakes are ordinarily circulated with a mean of 0.

• The mistakes are fixed.

The test measurement is determined with the accompanying equation:

Where Et are residuals from a customary least squares relapse.

The Durbin Watson test reports a test measurement, with a worth from 0 to 4, where:

• 2 is no autocorrelation.

• 0 to <2 is positive autocorrelation (regular in time arrangement information).

• >2 to 4 is negative autocorrelation (more uncommon in time arrangement information).

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The Durbin Watson test statistic value is 0.278909. The Durbin Watson test statistic value is
0.278908596. We want to test the null hypothesis of zero autocorrelation in the residuals against
the alternative that the residuals are positively auto correlated at the 1% level of significance.
The column labeled k=1. Cross-referencing the indicated row and column, we will find that the
printed bounds are dL = 1.382 and dU = 1.449.

If the observed value of the test statistic is less than the tabulated lower bound, then we should
reject the null hypothesis of non-autocorrelated errors in favor of the hypothesis of positive first-
order autocorrelation. Since 0.24878 is less than 1.382, we reject the null hypothesis. If the test
statistic value were greater than dU, we would not reject the null hypothesis.

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6. Conclusion
6.1. Findings

Acf value cross the bound which means this regression does not hold. Value of Durbin Watson
statistic is 0.278909 which means it is positive autocorrelation. A stock price displaying positive
autocorrelation would indicate that the price yesterday has positive correlation on today price,
so if the stock price fell yesterday, it is also likely that it falls today.

6.2. Suggestions
To improve it we need to add a new variable for example, attempt to predict the close price of a
stock by using the debt-to-asset ratio, profit per share and dividend per share of the issuing
corporation.

6.3. Limitations
 This study is restricted to a few number of years i.e. 5 years
 This study is based only secondary data which was collected from finance yahoo
 Stock market is an unpredictable market which involves various factors and is not limited
to the quantitative aspect.

6.4. Conclusions
In this paper, we study to predict financial movement direction. Minitab is a promising type of
tool for financial forecasting. This is a clear message for financial forecasters and traders, which
can lead to a capital gain. However, each method has its own strengths and weaknesses we also
observed that the choice of the indicator functions can dramatically improve/reduce the
accuracy of the prediction system. Also a particular Machine Learning Algorithm might be

28
better suited to a particular type of stock, say Technology Stocks, whereas the same algorithm
might give lower accuracies while predicting some other types of Stocks, say Energy Stocks.

29
Bibliography
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[3] Online Stock Trading Guide. Head and shoulders pattern, March 2015.

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[7] Netflix Official Website. 2018a. “Long-Term View”. Last accessed December 19.
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[8] Oaks, Rachel. 2017. “Netflix: What the World is watching”. Last accessed December 19.
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Appendix

31
Plagiarism report

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