Day-ahead stock price forecasting using hybrid model

Subject Areas : Journal of Investment Knowledge

Vahid Vafaei Ghaeini ¹ , Alimohammad Kimiagari ²

1 - Msc Student in Financial engineering, Faculty of Industrial Engineering and Management System, AmirKabir Univercity, Tehran, Iran
2 - prof in Industrial Engineering and Management System, Faculty of Industrial Engineering and Management System, AmirKabir Univercity, Tehran, Iran

Received: 2017-12-18 Accepted : 2018-04-10 Published : 2019-06-22

Keywords: ANN, ARMA-EGARCH, Forecasting, Wavelet Transform,

Abstract :

Forecasting financial markets is an important issue in finance area and research studies. Importance of forecasting on one hand and its complexity, on the other hand, researchers have done much work in this area and proposed many methods. In this research, we propose a hybrid model include wavelet transform, ARMA-EGARCH and NN for day-ahead forecasting of stock market price in different markets. At first WT is used to decompose and reconstruct time series into detailed and approximated parts. And then we used ARMA-EGARCH and NN models respectively for forecasting details and approximate series. In this model we used technical index by approximate part to the improvement of our NN model. Finally, we combine prediction of each model together. For validation, proposed model compare with ANN, ARIMA-GARCH and ARIMA-ANN models for forecasting stocks price in UA and Iran markets. Our results indicate that proposed model has better performance than others model in both markets.      

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