IDEAS home Printed from https://ideas.repec.org/a/jof/jforec/v29y2010i3p271-284.html
   My bibliography  Save this article

Foreign exchange market prediction with multiple classifiers

Author

Listed:
  • Bo Qian

    (Boyd Graduate Studies Research Center, Department of Computer Science, University of Georgia, Athens, Georgia, USA)

  • Khaled Rasheed

    (Boyd Graduate Studies Research Center, Department of Computer Science, University of Georgia, Athens, Georgia, USA)

Abstract

Foreign exchange market prediction is attractive and challenging. According to the efficient market and random walk hypotheses, market prices should follow a random walk pattern and thus should not be predictable with more than about 50% accuracy. In this article, we investigate the predictability of foreign exchange spot rates of the US dollar against the British pound to show that not all periods are equally random. We used the Hurst exponent to select a period with great predictability. Parameters for generating training patterns were determined heuristically by auto-mutual information and false nearest-neighbor methods. Some inductive machine-learning classifiers-artificial neural network, decision tree, k -nearest neighbor, and naïve Bayesian classifier-were then trained with these generated patterns. Through appropriate collaboration of these models, we achieved a prediction accuracy of up to 67%. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Bo Qian & Khaled Rasheed, 2010. "Foreign exchange market prediction with multiple classifiers," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(3), pages 271-284.
  • Handle: RePEc:jof:jforec:v:29:y:2010:i:3:p:271-284
    DOI: 10.1002/for.1124
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/for.1124
    File Function: Link to full text; subscription required
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hsieh, David A, 1991. " Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance, American Finance Association, vol. 46(5), pages 1839-1877, December.
    2. Manolis Kavussanos & Everton Dockery, 2001. "A multivariate test for stock market efficiency: the case of ASE," Applied Financial Economics, Taylor & Francis Journals, vol. 11(5), pages 573-579.
    3. Liam A. Gallagher & Mark P. Taylor, 2002. "Permanent and Temporary Components of Stock Prices: Evidence from Assessing Macroeconomic Shocks," Southern Economic Journal, Southern Economic Association, vol. 69(2), pages 345-362, October.
    4. Marco Corazza & A. G. Malliaris, 2005. "Multi-Fractality in Foreign Currency Markets," World Scientific Book Chapters,in: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays, chapter 11, pages 151-184 World Scientific Publishing Co. Pte. Ltd..
    5. Butler, Kirt C. & Malaikah, S. J., 1992. "Efficiency and inefficiency in thinly traded stock markets: Kuwait and Saudi Arabia," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 197-210, February.
    6. Halbert White, 2000. "A Reality Check for Data Snooping," Econometrica, Econometric Society, vol. 68(5), pages 1097-1126, September.
    7. Jensen, Michael C., 1978. "Some anomalous evidence regarding market efficiency," Journal of Financial Economics, Elsevier, vol. 6(2-3), pages 95-101.
    8. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    9. Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lazăr, Dorina & Todea, Alexandru & Filip, Diana, 2012. "Martingale difference hypothesis and financial crisis: Empirical evidence from European emerging foreign exchange markets," Economic Systems, Elsevier, vol. 36(3), pages 338-350.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jof:jforec:v:29:y:2010:i:3:p:271-284. 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/2966 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.