Improving Returns on Strategy Decisions through Integration of Neural Networks for the Valuation of Asset Pricing: The Case of Taiwanese Stock

Yi-Chang Chen (), Shih-Ming Kuo (), Yonglin Liu, Zeqiong Wu and Fang Zhang ()
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Yi-Chang Chen: School of Finance and Accounting, Fuzhou University of International Studies and Trade, Fuzhou 350202, China
Shih-Ming Kuo: Department of Nursing, Fooyin University, Kaohsiung City 83102, Taiwan
Yonglin Liu: School of Electrical and Computer Engineering, Nanfang College Guangzhou, Guangzhou 510970, China
Zeqiong Wu: School of Electrical and Computer Engineering, Nanfang College Guangzhou, Guangzhou 510970, China
Fang Zhang: School of Public Finance and Taxation, Guangdong University of Finance & Economics, Guangzhou 510320, China

IJFS, 2022, vol. 10, issue 4, 1-15

Abstract: Most of the growth forecasts in analysts’ evaluation reports rely on human judgment, which leads to the occurrence of bias. A back-propagation neural network (BPNN) is a financial technique that learns a multi-layer feedforward network. This study aims to integrate BPNN and asset pricing models to avoid artificial forecasting errors. In terms of evaluation, financial statements and investor attention were used in this case study, demonstrating that modern analysts should incorporate the evaluation advantages of big data to provide more reasonable and rational investment reports. We found that assessments of revenue, index returns, and investor attention suggest that stock prices are prone to undervaluation The levels of risk-taking behaviors were used in the classification of robustness analysis. This study showed that when betas range from 1% to 5%, both risk-taking levels of investors can hold buying strategies for the long term. However, for lower risk-taking preferences, only when the change exceeds 10 percent, the stock price is prone to overvaluation, indicating that investors can sell or adopt a more cautious investment strategy.

Keywords: evaluation; back-propagation neural network; asset pricing; investor attention; risk-taking; investment strategy (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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