Is it possible to predict long-term success with k-NN? Case Study of four market indices (FTSE100, DAX, HANGSENG, NASDAQ)
This case study tests the possibility of prediction for "success" (or "winner") components of four stock & shares market indices in a time period of three years from 02-Jul-2009 to 29-Jun-2012.We compare their performance ain two time frames: initial frame three months at the beginning (02/06/2009-30/09/2009) and the final three month frame (02/04/2012-29/06/2012). To label the components, average price ratio between two time frames in descending order is computed. The average price ratio is defined as the ratio between the mean prices of the beginning and final time period. The "winner" components are referred to the top one third of total components in the same order as average price ratio it means the mean price of final time period is relatively higher than the beginning time period. The "loser" components are referred to the last one third of total components in the same order as they have higher mean prices of beginning time period. We analyse, is there any information about the winner-looser separation in the initial fragments of the daily closing prices log-returns time series. The Leave-One-Out Cross-Validation with k-NN algorithm is applied on the daily log-return of components using a distance and proximity in the experiment. By looking at the error analysis, it shows that for HANGSENG and DAX index, there are clear signs of possibility to evaluate the probability of long-term success. The correlation distance matrix histograms and 2-D/3-D elastic maps generated from ViDaExpert show that the winner components are closer to each other and winner/loser components are separable on elastic maps for HANGSENG and DAX index while for the negative possibility indices, there is no sign of separation.
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.:
- Curcio, Riccardo, et al, 1997. "Do Technical Trading Rules Generate Profits? Conclusions from the Intra-day Foreign Exchange Market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(4), pages 267-80, October.
- M. Deidda & N. Garrido & M. Pulina, 2011. "Exploring the dynamics of the efficiency in the Italian hospitality sector. A regional case study," Working Paper CRENoS 201117, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Dose, Christian & Cincotti, Silvano, 2005. "Clustering of financial time series with application to index and enhanced index tracking portfolio," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 145-151.
- Meredith Beechey & David Gruen & James Vickery, 2000. "The Efficient Market Hypothesis: A Survey," RBA Research Discussion Papers rdp2000-01, Reserve Bank of Australia.
- Fernandez-Rodriguez, Fernando & Sosvilla-Rivero, Simon & Andrada-Felix, Julian, 1999. "Exchange-rate forecasts with simultaneous nearest-neighbour methods: evidence from the EMS," International Journal of Forecasting, Elsevier, vol. 15(4), pages 383-392, October.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:1307.8308. 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: (arXiv administrators)
If references are entirely missing, you can add them using this form.