The “Falling Knife” Project

Data for Impact Summer Institute 2020

Students on Summer Project Team:
Trevor Aschmies '21, Business Information Systems
Ethan Liefer '24, undeclared
Shiqi Liu '21, Statistics
Wenmin Liu '21, CSB
Eric Meskin '21, Finance
Andrew Park '21, Bioengineering
Delton Tschida '21, Finance / Industrial & Systems Engineering

Faculty Mentor(s): Patrick Zoro, Professor of Practice, Finance

Project Video: Click here to view

Project description:
The goal of this project is building a software with customer interface to detect whether or not the stock that a user has selected is a “falling knife.” If the stock is a falling knife, how far is the fall, and when will it go back up to its previous price level? Students learned what a falling knife is, how to find these falling knives, and to teach machine learning the pattern of them. Lastly, students have built the base model on findings and back tested its accuracy. Currently the project uses Technical Analysis to identify those short term (days, weeks) falling knives with MACD, RSI, EMA, and the fall duration. The team cross-checked the S&P 500 for the past 30 years to see if findings hold, and used fundamental analysis and financial matrices to identify what counts as a long-term (Months, years) falling knife. To see more about the project, see a 30-minute video from Masters in Financial Engineering students at https://youtu.be/ar81xeFfY5o.