Sunday, August 31, 2014

Considering an ARIMA model

I came across a blog post and a paper describing methods for implementing an ARIMA model as a price forecaster. They both deal with the stock market, which is not  exactly the same as FOREX. But given the lack of ARIMA examples involving FOREX, I've decided to take a look at these:

http://programming-r-pro-bro.blogspot.mx/2013/04/forecasting-stock-returns-using-arima.html
http://www.hindawi.com/journals/jam/2014/614342/

From the blog post it seems that ARIMA doesn't have a very good resolution in it's predictions. The most it seems to be able to predict is a likely dynamic range for the future return rate. The paper shows how an ANN predicts fluctuations more closely. Still: this paper uses a FFNN, whereas the russian paper from one of my earlier posts uses a SRN.

ARIMA seems more limited than the SRN in it's predictive power. Therefor, I have decided to give priority to the SRN approcah using the newelm function from neurolab which I mentioned in an earlier post.

The ARIMA implementation, nevertheless, has inspired me to attempt a new rustic buy-and-hold algorithm. One which takes into account the density of price falls through time, and a likely dynamic range for it. I will be reporting on the results later on.

1 comment:

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