International Journal of Marketing & Human Resource Research

e-ISSN: 2746-4040
Vol. 2, No. 2 April 2021

Stock Price Prediction Using Arima Model

Supriti Khandelwal1), Debasis Mohanty2)
1), 2)
ITM University, Raipur, India
Email: supritikhandelwal14@gmail.com1)
Abstract
This paper presents in depth method of building ARIMA model for stock price prediction. The experimental
results obtained with best ARIMA model incontestable the potential of ARIMA models to predict stock costs
satisfactory on short-run basis. This might guide investors in stock market to create profitable investment
selections. With the results obtained ARIMA models will compete fairly well with rising prediction techniques
in short-run prediction. Here we take the data of three sectors from NSE for three years from April 18 to Feb 21
and predict the future prices until the end of Dec 21 using ARIMA model.
Keywords: stock price, ARIMA model, financial management
1. Introduction
Prediction will continue to be a stimulating area of experimentation for researchers within the
domain field continuously aiming to improve existing predictive models.the explanation is
that institutions and people are authorized to create investment choices and skill to arrange
and develop effective strategy regarding their daily and future endeavors. Stock worth
prediction is thought to be one in every of most troublesome tasks to accomplish in money
statement because of complicated nature of securities market.
ARIMA models are from statistical models’ views. Generally, it's rumored in literature that
prediction is done from 2 perspectives: statistical and artificial intelligence techniques.
ARIMA models arerenowned to be strong and efficient in money statistic statement
particularly short-run prediction than even the fore most wide spread ANNs techniques. it's
been extensively utilized in field of economics and finance. alternative statistics models are
regression methodology, exponential smoothing, generalized autoregressive conditional
heteroscedasticity (GARCH). Few connected works that has engaged ARIMA model for
prediction includes. in this project intensivemethod of building ARIMA models for short-run
stock value prediction is presented. The results obtained from real-life information in
contestable the potential strength of ARIMA models to produce investors short-run prediction
that would aid investment process.
2. Literature Reviews
Akpinar&Yumusak(2013) Forecasting natural gas consumption in Turkey is extremely
necessary at energy sector. For this purpose kindly prediction ways are used. during this study
autoregressive integrated moving average (ARIMA) methodology is used and main plan
during this study is removing cycling element in time series. ARIMA models are applied and
mean absolute percent errors (MAPE) are found. selected minimum MAPE and values of
(p,d,q) predictions for Models. This study, time series data divided to co-seasonal exhibit
behavior. For year of 2012, merged Model and Model seven are compared. Error rate reduced
2.2% from traditional prediction (Model 7) to merged Model. Following studies using this
approach might be use seasonal impact - is additionally referred to as SARIMA – models.
also if there have another independence data, relational methods might be used like multiple
correlation, ARIMAX (ARIMA with exogenous), NARX (nonlinear autoregressive
exogenous). If independence variables are normalized, learning algorithms like neural

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e-ISSN: 2746-4040
Vol. 2, No. 2 April 2021

network, formal logic might be used.

Banerjee(2014)The Indian stock exchange is that the center of interest for several economists,
investors and researchers and thus it's quite necessary for them to possess a transparent
understanding of the current standing of the market. the foremost reliable way to forecast the
long run is to undertake to know the current and therefore, consequently the prior objective as
the analysis of the current scenario of the Indian exchange therefore on perceive and check
out to make a stronger future scope for investment. On this context, they need collected
information on the monthly closing stock indices of sensex for 6 years (2007-2012). The
analysis of the performance of the Indian exchange for 6 years with reference to time presents
them a suitable time series ARIMA model (1,0, I) that helps them in predicting the
approximate values of the longer term indices. Out of the initial six completely different
models, they select ARIMA( I ,0, I) because the best model supported the actual fact that it
satisfies all the conditions for the goodness of work not like the remainder.
Sharma, Et Al (2018) Forecasting is a vital tool to estimate the area, production and
productivity of any crop in close to future. There are many strategies out there for foresting
the longer-term figures and autoregressive integrated moving average (ARIMA) is one
among them. Maize is a vital cereal of India, keeping in sight its importance for rained areas
of the country and numerous uses. This study was conducted to forecast maize production for
the year 2018 to 2022 based on the estimation of appropriate ARIMA model. The analysis of
ACF&PACF of differenced series discovered that ARIMA (2, 1, 0) was the foremost
appropriate model for statement forecasting the diagnostics, like ACF, PACF, AIC, SBC etc.
The fitted model indicated a rise in maize production within the next five years from
19590’000 MT within the year 2018 to 21307’000 MT within the year 2022.
Ramakrishna&Kumari (2018) Autoregressive integrated moving average (ARIMA) approach
has been applied for modeling and prediction of rice production of India. Autocorrelation
function (ACF) and partial autocorrelation function (PACF) functions were calculable, that
led to the identification and construction of ARIMA models. A significant increasing linear
trend within the total rice production in India has been found. The model that satisfies all the
diagnostic checks was thought of for prediction. For prediction, objective was to predict the
four future values of your time series. From the study it's been found that, there's a
considerably increasing trend within the total rice production in India, the projected
production would be raised to 112.90 million tonnes by 2020 AD.
3. Objective
• To Predict the future prices of FMCG SECTOR
• Stock price predictions of PHARMA SECTOR
• To know the future market condition of BANKING SECTOR
4. Research Methodology
Research Methodology is taken into account because the nerve of the project. Without as
proper well-organized analysis plan it is not possible to complete the project and reach to any
conclusion the project was based on the survey plan. The main objective of the survey was to
gather applicable knowledge that work as a base for drawing conclusion and obtaining result.
Therefore research methodology is away to consistently solve the research problem. Research
methodology not solely talks of {the methodology thetactic the strategy} however
additionally logic behind the method use within the context of a research study and it

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e-ISSN: 2746-4040
Vol. 2, No. 2 April 2021

explains why a selected method has been used in the preference of the oppositeways.
The method utilized in this study to develop ARIMA model for stock value prediction is
explained well below. Stock data used in this analysis work are historical monthly stock costs
obtained from national stock exchanged. The info composed of 4parts namely: open price,
low price, high priceand closepricerespectively. During this analysis, the closing price is
chosen to represent the worth of the index to be expected. Closing price is chosen as a result
of it reflects all the activities of the index during atrading day. We took value of three sectors
of three years on monthly basis to predict the long run costs and also the sectors are:
1. FMCGSECTOR
2. BANKING SECTOR
3. PHARMACEUTICALSSETO
Here the PYTHON software system used for implementing ARIMA model.
5. Data Analysis
5.1 Graphical representation of Stationary Time Series

Figure 1. Figure Graphical representation of Stationary Time Series FMCG Sector

Figure 2. Figure Graphical representation of Stationary Time Series Banking Sector

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Figure 3. Figure Graphical representation of Stationary Time Series Pharma Sector

First, we have a tendency to convert the non-stationary statistic to stationary statistic by
changing the closing price in log. This can bean important step in preparing information that
is going to beused in an ARIMA model.
5.2 Autocorrelation Function

Figure 4. Figure Graphical Autocorrelation Function FMCG Sector

Figure 5. Figure Graphical Autocorrelation Function Banking Sector

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Figure 6. Figure Graphical Autocorrelation Function Pharma Sector

Autocorrelation refers to however related to a time series is with its past values whereas the
ACF is that the plot accustomed see the correlation between the points, up to and as well as
the lag unit. In ACF, the coefficient of correlation is within thex-axis whereas the number of
lags is within they-axis.The Auto correlation operate plot can allow you toknowledge the
given time series is related to with itself.
As per the graph at leg onethere is a positive autocorrelation it suggests thatwe tend to use the
AR Model.
5.3 Partial Autocorrelation Function

Figure 7. Figure Graphical Partial Autocorrelation Function FMCG Sector

Figure 8. Figure Graphical Partial Autocorrelation Function Banking Sector

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Figure 9. Figure Graphical Partial Autocorrelation Function Pharma Sector

A partial autocorrelation may be a outline of the connection between an observation in an
exceedingly time series with observations at previous time steps with the relationships of
intervening observations removed. The partial autocorrelation at lag k is that the correlation
that results after removing the impact of any correlations because of the terms at shorter lags.
Here in lag one it shows direct correlation however there's random jumps within the time
series plot whose impact is felt in two or a lot of consecutive periods. These jumps represent
the error calculated in our ARIMA model and represent what the MA element would lag. A
purely MA model would smooth out these sudden jumps just like the exponential smoothing
technique.
5.4 First Difference Autocorrelation:

Figure 10. Figure Graphical First Difference Autocorrelation FMCG Sector

Figure 11. Figure Graphical First Difference Autocorrelation Banking Sector

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Vol. 2, No. 2 April 2021

Figure 12. Figure Graphical First Difference Autocorrelation Pharma Sector

Above is the combine graphical representation of ACF and PACF.
6. Interpretation of FMCG Sector
Table 1. Table ARIMA MODEL

According to the above table, the ARIMA MODEL is (0, 1, 0).It means it is a Random Walk
Model.
6.1 Price Prediction

Figure 13. Figure graph is the predicted price from March 2021 to December 2021 of FMCG
Sector.

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Vol. 2, No. 2 April 2021

Above table and graph is the predicted price from March 2021 to December 2021 of FMCG
SECTOR.
As we can see that, there is an increasing trend in March but after that, it will go down until
May month. After May, it could increase slowly until August and after August; it will be
going downward until December.
7. Interpretation of Banking
Table 2. Table ARIMA MODEL

According to the above table, the ARIMA MODEL is (0, 1, 0).

It means it is a Random Walk Model.
7.1 Price Prediction:

Figure 14. Figure graph is the predicted price from March 2021 to December 2021 of
Banking Sector.
Above table and graph is the predicted price from March 2021 to December 2021 of
BANKING SECTOR.

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In FEB 21, the price was 34803 of banking sectors but as we can see that in March, the price
is coming down to 30980. It will keep decreasing till June and there will be is slightly
increasing in July which is 23538 but after July it will go down until October after October
there will be a rise in price in November but in December it again going to be down to the
price 18970.
8. Interpretation of Pharmaceuticals Sector
Table 2. Table ARIMA MODEL

According to the above table, the ARIMA MODEL is (0, 1, 0).

It means it is a Random Walk Model.
8.1 Price Prediction:

Figure 15. Figure graph is the predicted price from March 2021 to December 2021 of
Banking Sector.
Above table and graph is the predicted price from March 2021 to December 2021 of
BANKING SECTOR.
In FEB 21 the price was 11927 of pharma sectors but as we can see that in March the price is
goes up to 12811 but after it will keep decreasing and in some time increasing but at the end
of the year the prices could go down to 7118.

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9. Conclusion
From the above research, the name “Stock Price Prediction Using ARIMA” as I have taken 3
sectors and their three years of data on monthly basis for the research by using the ARIMA
model, I have used python software to apply the ARIMA model and successfully predict the
price of these three sectors from March 21 to December 21. According to the research, the
FMCG sector and PHARMA sector will be upward on March 21 but the banking sector will
be down on March 21.Therefore, if the sellers sell their share of FMCG and PHARMA then
they will be in the profit position. After March 21 the price of the three sectors is going to be
down it results that the buyers will be in the profit position. In August and July 21 there will
be increasing in the price of the three sectors. However, at the end of the year, there are huge
downfalls in all three sectors, which leads to loss for the sellers and profit for the buyers.
Refrence
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