Do Dynamic Neural Networks Stand a Better Chance in Fractionally Integrated Process Forecasting?
AbstractThe main purpose of the present study was to investigate the capabilities of two generations of models such as those based on dynamic neural network (e.g., Nonlinear Neural network Auto Regressive or NNAR model) and a regressive (Auto Regressive Fractionally Integrated Moving Average model which is based on Fractional Integration Approach) in forecasting daily data related to the return index of Tehran Stock Exchange (TSE). In order to compare these models under similar conditions, Mean Square Error (MSE) and also Root Mean Square Error (RMSE) were selected as criteria for the models’ simulated out-of-sample forecasting performance. Besides, fractal markets hypothesis was examined and according to the findings, fractal structure was confirmed to exist in the time series under investigation. Another finding of the study was that dynamic artificial neural network model had the best performance in out-of-sample forecasting based on the criteria introduced for calculating forecasting error in comparison with the ARFIMA model.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 45977.
Date of creation: 11 Sep 2012
Date of revision:
Stock Return; Forecasting; Long Memory; NNAR; ARFIMA;
Other versions of this item:
- Majid Delavari & Nadiya Gandali Alikhani & Esmaeil Naderi, 2013. "Do Dynamic Neural Networks Stand a Better Chance in Fractionally Integrated Process Forecasting?," International Journal of Economics and Financial Issues, Econjournals, vol. 3(2), pages 466-475.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-ETS-2013-04-13 (Econometric Time Series)
- NEP-FOR-2013-04-13 (Forecasting)
- NEP-ORE-2013-04-13 (Operations Research)
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