How Do Neural Networks Enhance the Predictability of Central European Stock Returns?
In this paper, the author applies neural networks as nonparametric and nonlinear methods to Central European (Czech, Polish, Hungarian, and German) stock market returns modeling. In the first part, he presents the intuition of neural networks and also discusses statistical methods for comparing predictive accuracy, as well as economic significance measures. In the empirical tests, he uses data on the daily and weekly returns of the PX-50, BUX, WIG, and DAX stock exchange indices for the 2000–2006 period. He finds neural networks to have a significantly lower prediction error than the classical models for the daily DAX series and the weekly PX-50 and BUX series. The author also achieves economic significance of the predictions for both the daily and weekly PX-50, BUX, and DAX, with a 60% prediction accuracy.
Volume (Year): 58 (2008)
Issue (Month): 07-08 (Oktober)
|Contact details of provider:|| Postal: Opletalova 26, CZ-110 00 Prague|
Phone: +420 2 222112330
Fax: +420 2 22112304
Web page: http://ies.fsv.cuni.cz/
More information through EDIRC
References listed on IDEAS
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.:
- John Barkoulas & Nickolaos Travlos, 1998. "Chaos in an emerging capital market? The case of the Athens Stock Exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 8(3), pages 231-243.
- Diebold, Francis X & Mariano, Roberto S, 2002.
"Comparing Predictive Accuracy,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 20(1), pages 134-44, January.
- Chung-Ming Kuan, 2006. "Artificial Neural Networks," IEAS Working Paper : academic research 06-A010, Institute of Economics, Academia Sinica, Taipei, Taiwan.
- James M. Hutchinson & Andrew W. Lo & Tomaso Poggio, 1994.
"A Nonparametric Approach to Pricing and Hedging Derivative Securities Via Learning Networks,"
NBER Working Papers
4718, National Bureau of Economic Research, Inc.
- Hutchinson, James M & Lo, Andrew W & Poggio, Tomaso, 1994. " A Nonparametric Approach to Pricing and Hedging Derivative Securities via Learning Networks," Journal of Finance, American Finance Association, vol. 49(3), pages 851-89, July.
- Hsieh, David A, 1991. " Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance, American Finance Association, vol. 46(5), pages 1839-77, December.
- Henriksson, Roy D & Merton, Robert C, 1981. "On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills," The Journal of Business, University of Chicago Press, vol. 54(4), pages 513-33, October.
When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:58:y:2008:i:7-8:p:358-376. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Herrmannova)
If references are entirely missing, you can add them using this form.