Stock markets world over are attracting new comers daily, due to potential for attractive return on their investments. Global markets have turned out to be truly interdependent with liberalization of funds flow from surplus markets to potential markets that has already led to fair valuation of stocks world wide. How ever tools for prediction of stock markets are still evolving. There is need for increasing the accuracy of market predictions so that the interest in stock markets is sustained.
My area of interest in increasing accuracy levels of stock market prediction on day to day basis. The following factors need to be studied more and more in arriving stock market predictions on daily basis.
1. GLOBAL MARKETS: In these days of digital revolution, no market is insulated from the impact of happenings in other world markets. It appears as though they rise and fall together though they have little in common. For example with the time lag between world markets, we often come across the impact of US markets on Asian and European markets. This leader ship constantly changes. One day it is the turn of US markets in giving cues to the other markets to zoom, next day it is the Asian markets that give the lead. Another day it is the turn of European markets. Hence according to me due weight age need to be given to the trends in global markets to increase accuracy levels of stock market predictions.
2. NEWS STORIES: It is often observed that the markets react instantly to news stories. Especially on negative news stories the impact is more severe. For example a terrorist attack, a plane hijack, a statement by a world leader that can lead to war or tensions, a sudden fall of elected government, resignation by a big political leader often hit the markets with devastating effect. Hence news stories need to be constantly monitored and the investors need to be updated before the news impacts the markets to enable them to square up their positions and avoid huge losses. Hence due weight age need to be given for increasing accuracy levels in prediction of stock markets.
3. COMMODITY PRICES: Volatility in commodity prices are often seen impacting the stocks in that sector irrespective of the fact that there may not be loss or profit due to fluctuating commodity prices on the stock prices. An increase in Oil prices is often seen to lead to a rally in energy stocks or a fall in Oil prices leading to steep fall in energy prices. Hence due weight age need to be given to commodity prices on sector specific stocks.I propose the following weight ages may be given in increasing accuracy levels of stock market predictions on DAY TO DAY BASIS:
1. Stock fundamentals : 25%
2. Macro Economic factors: 15%
3. Futures and options: 10%
4. Global markets : 20%
5. News Stories :20%
6. Commodity Prices: 10%
Perhaps, these tools increase accuracy levels of stock market prediction and by using them the traders in the markets will avoid losses to some extent. No body can accurately predict where the stock markets stand in the medium or short term or long term due to the ever changing dynamics. The IF factor may not happen the way we predicted and hence the players in the market have to give due importance to the changing dynamics that effect the stock movement than merely relying on fundamentals of the stock.