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Modeling and forecasting abnormal stock returns using the nonlinear Gray Bernoulli model

Author

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  • Bahar Doryab
  • Mahdi Salehi

Abstract

Purpose - This study aims to use gray models to predict abnormal stock returns. Design/methodology/approach - Data are collected from listed companies in the Tehran Stock Exchange during 2005-2015. The analyses portray three models, namely, the gray model, the nonlinear gray Bernoulli model and the Nash nonlinear gray Bernoulli model. Findings - Results show that the Nash nonlinear gray Bernoulli model can predict abnormal stock returns that are defined by conditions other than gray models which predict increases, and then after checking regression models, the Bernoulli regression model is defined, which gives higher accuracy and fewer errors than the other two models. Originality/value - The stock market is one of the most important markets, which is influenced by several factors. Thus, accurate and reliable techniques are necessary to help investors and consumers find detailed and exact ways to predict the stock market.

Suggested Citation

  • Bahar Doryab & Mahdi Salehi, 2018. "Modeling and forecasting abnormal stock returns using the nonlinear Gray Bernoulli model," Journal of Economics, Finance and Administrative Science, Emerald Group Publishing Limited, vol. 23(44), pages 95-112, April.
  • Handle: RePEc:eme:jefasp:jefas-06-2017-0075
    DOI: 10.1108/JEFAS-06-2017-0075
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