Financial Forecast for the Relative Strength Index
AbstractIn this paper we provide a closed-form expression for one of the most popular index in Technical Analysis: the Relative Strength Index (RSI). Given that we show how the standard binomial model for the stock price can be used to predict RSI. The algorithm is as simple as to code a standard European option. In an empirical application to the Chilean exchange rate we show how the method works having a better out of sample performance than an ARMA(1,1) model.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 25913.
Date of creation: Apr 2010
Date of revision: Apr 2010
Relative Strength Index; Binomial Model; Financial Forecast;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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