Non-linear financial time series forecasting - Application to the Bel 20 stock market index

Amaury Lendasse · Eric de Bodt · Vincent Wertz B · Michel Verleysen

129 citations0/0 files storedEuropean Journal of Economic and Social Systems

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Stock Market Forecasting Methods Neural Networks and Applications Forecasting Techniques and Applications

Abstract

We developed in this paper a method to predict time series with non-linear tools.The specificity of the method is to use as much information as possible as input to the model (many past values of the series, many exogenous variables), to compress this information (by a non-linear method) in order to obtain a state vector of limited size, facilitating the subsequent regression and the generalization ability of the forecasting algorithm and to fit a non-linear regressor (here a RBF neural network) on the reduced vectors.We show that this method is able to find non-linear relationships in artificial and real-world financial series.On a difficult task, which consists in forecasting the tendency of the Bel 20 stock market index, we show that this method improves the results compared both to linear models and to non-linear ones where the non-linear compression is not used.

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References

1977Time Series Analysis: Forecasting and Control 1965The Behavior of Stock-Market Prices 1977Time Series Analysis: Forecasting and Control 2012The Econometrics of Financial Markets 1978Time Series Analysis: Forecasting and Control.1997The Econometrics of Financial Markets 1992Simple Technical Trading Rules and the Stochastic Properties of Stock Returns 1990Data-Snooping Biases in Tests of Financial Asset Pricing Models

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