The Improved Semi-Parametric Markov Switching Models for Predicting Stocks Prices

Subject Areas : Statistical Methods in Financial Management

hossien  naderi ¹ (ایلام دانشگاه آزاد ایلام)
Mehrdad  Ghanbari ² (استادیار گروه حسابداری، دانشکده علوم انسانی، واحد کرمانشاه، دانشگاه آزاد اسلامی، کرمانشاه، ایران)
Babak  Jamshidi Navid ³ (Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.)
Arash  Nademi ⁴ (عضو هیات علمی دانشگاه آزاد اسلامی واحد ایلام)

Received: 2021-02-17 Accepted : 2021-10-19 Published : 2024-02-22

Keywords: Strategies for buying and selling, Kernel function, EM algorithm, Markov Switching Model.s,

Abstract :

The modeling of strategies for buying and selling in Stock Market Investment have been the object of numerous advances and uses in economic studies, both theoretically and empirically. One of the popular models in economic studies is applying the Semi-parametric Markov Switching models for fore-casting the time series observations based on stock prices. The Semi-parametric Markov Switching models for these models are a class of popular methods that have been used extensively by researchers to increase the accu-racy of fitting processes. The main part of these models is based on kernel and core functions. Despite of existence of many kernel and core functions that are capable in applications for forecasting the stock prices, there is a widely use of Gaussian kernel and exponential core function in these mod-els. But there is a question if other types of kernel and core functions can be used in these models. This paper tries to introduce the other kernel and core functions can be offered for good fitting of the financial data. We first test three popular kernel and four core functions to find the best one and then offer the new strategy of buying and selling stocks by the best selection on these functions for real data.

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