Forecasting Startup Return using Artificial Intelligence Methods and Econometric Models and Portfolio Optimization Using VaR and C-VaR

In this paper, we have tried to study the main role of startups in economy, their characteristics, main goals and etc. The main goal of article is prediction of startup's return using artificial intelligence methods such as genetic algorithm (GA) and artificial neural network (ANN). Some global indices such as S&P۵۰۰, DJAI, and economic indicators such as ۱۰ years Treasury yield, Wilshire ۵۰۰۰ Total Market Full Cap Index along with some other special indicators in startups like team, idea, timing and etc. are used as input variables. GA is used as feature selection and finding the most important variables. ANN is used as an optimization model and prediction of startup's returns. We used econometric models such as regression analysis. We have estimated Value at risk (VaR) and Conditional Value at risk (C-VAR) for considered portfolios including three startups (public company) such as Dropbox, Inc. (DBX), Scout۲۴ SE (G۲۴.DE) and TIE.AS and optimal portfolio formation. The results show that AI based methods are more powerful in prediction of startup's return. On the other hand, VaR and C-VaR models are very beneficial approach in minimizing risk and maximizing return.

Keywords:

Artificial Neural Network (ANN) , Genetic Algorithm (GA) , Econometric Models , Startup valuation , Value at Risk and Conditional Value at Risk (VaR & C-VaR)