Md. Shakil Sikder, Department of Statistics, BSMRSTU

Predicting which direction the stock market will move is one of the most difficult and challenging things to do. Efficient Market Hypothesis (EMH) states that accurate prediction of stock price is nearly impossible. Driven by supply and demand, macroeconomic changes such as inflation or political instability can affect whole markets, while local events like company financial announcements or product releases impact individual stocks. There are so many factors involved in the prediction – physical factors vs. physhological, rational and irrational behaviour, etc. All these aspects combine to make share prices volatile and very difficult to predict with a high degree of accuracy. Machine learning techniques have the potential to unearth patterns and insights we didn’t see before, and these can be used to make unerringly accurate predictions.

In the 1960s, Eugene Fama demonstrated that stock price movements are impossible to predict in the short-term and that new information affects prices almost immediately, which means that the market is efficient. The impact of Eugene Fama's, results has extended beyond the field of research. For example, his results influenced the development of index funds.