Directional forecasting in financial time series using support vector machines: The USD/Euro exchange rate
AbstractIn this paper, we present a novel machine learning based forecasting system of the EU/USD exchange rate directional changes. Specifically, we feed an overcomplete variable set to a Support Vector Machines (SVM) model and refine it through a Sensitivity Analysis process. The dataset spans from 1/1/1999 to 30/11/2011; the data of the last 7 months are reserved for out-of-sample testing. Results show that the proposed scheme outperforms various other machine learning methods treating similar scenarios.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Democritus University of Thrace, Department of Economics in its series DUTH Research Papers in Economics with number 5-2012.
Length: 19 pages
Date of creation: 27 Jan 2012
Date of revision:
Contact details of provider:
Postal: Department of Economics, University Campus, Komotini, 69100, Greece
Phone: (25310) 39.503
Fax: (25310) 39.502
Web page: http://www.econ.duth.gr/
More information through EDIRC
Machine Learning; Support Vector Machines; Exchange Rates; Forecasting;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-EEC-2012-10-13 (European Economics)
- NEP-ETS-2012-10-13 (Econometric Time Series)
- NEP-FOR-2012-10-13 (Forecasting)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shiyi Chen & Wolfgang K. Härdle & Kiho Jeong, 2010. "Forecasting volatility with support vector machine-based GARCH model," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(4), pages 406-433.
- De Grauwe, Paul & Grimaldi, M, 2006. "Exchange rate puzzles: A tale of switching attractors," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/101113, Katholieke Universiteit Leuven.
- Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
- Kilian, Lutz & Taylor, Mark P., 2003.
"Why is it so difficult to beat the random walk forecast of exchange rates?,"
Journal of International Economics,
Elsevier, vol. 60(1), pages 85-107, May.
- Kilian, Lutz & Taylor, Mark P, 2001. "Why is it so Difficult to Beat the Random Walk Forecast of Exchange Rates?," CEPR Discussion Papers 3024, C.E.P.R. Discussion Papers.
- Kilian, Lutz & Taylor, Mark P., 2001. "Why is it so difficult to beat the random walk forecast of exchange rates?," Working Paper Series 0088, European Central Bank.
- Lutz Kilian & Mark P. Taylor, 2001. "Why is it so difficult to beat the Random Walk Forecast of Exchange Rates?," Tinbergen Institute Discussion Papers 01-031/4, Tinbergen Institute.
- Lutz Kilian & Mark P. Taylor, 2001. "Why Is It So Difficult to Beat the Random Walk Forecast of Exchange Rates?," Working Papers 464, Research Seminar in International Economics, University of Michigan.
- Fama, Eugene F., 1984. "Forward and spot exchange rates," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 319-338, November.
- MacDonald, Ronald & Nagayasu, Jun, 1998.
"On the Japanese Yen-U.S. Dollar Exchange Rate: A Structural Econometric Model Based on Real Interest Differentials,"
Journal of the Japanese and International Economies,
Elsevier, vol. 12(1), pages 75-102, March.
- MacDonald, Ronald, 1997. "On the Japanese Yen-US Dollar Exchange Rate: A Structural Econometric Model Based on Real Interest Differentials," CEPR Discussion Papers 1639, C.E.P.R. Discussion Papers.
- De Grauwe, Paul & Grimaldi, Marianna, 2006. "Exchange rate puzzles: A tale of switching attractors," European Economic Review, Elsevier, vol. 50(1), pages 1-33, January.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Lance Taylor, 2004. "Exchange rate indeterminacy in portfolio balance, Mundell--Fleming and uncovered interest rate parity models," Cambridge Journal of Economics, Oxford University Press, vol. 28(2), pages 205-227, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Periklis Gogas).
If references are entirely missing, you can add them using this form.