Despite the extent of a theoretical framework in financial market studies, a vast majority of the traders, investors and computer scientists have relied only on technical and timeseries data for predicting future prices. So far, the forecasting models have rarely incorporated macro-economic and market fundamentals successfully, especially with short-term predictions ranging less than a month. In this investigation on the predictability of certain financial markets, an attempt has been made to incorporate a un-exampled and encompassing set of parameters into an Artificial Neural Network prediction system. Experiments were carried out on three market instruments ??? namely currency exchange rates, share prices and oil prices. The choice of parameters for inclusion or exclusion, and the time frame adopted for the experimental sets were derived from the market literature. Good directional prediction accuracies were achieved for currency exchange rates and share prices with certain parameters as inputs, which consisted of predicting short-term movements based on past movements. These predictions were better than the results produced by a traditional least square prediction method. The trading strategy developed based on the predictions also achieved a higher percentage of winning trades. No significant predictions were observed for oil prices. These results open up questions in the microstructure of the markets and provide an insight into the inputs required for market forecasting in the corresponding time frame, for future investigation. The study concludes by advocating the use of trend based input parameters and suggests ways to improve neural network forecasting models.
| Identifer | oai:union.ndltd.org:ADTP/257912 |
| Date | January 2008 |
| Creators | Prasad, Jayan Ganesh, Information Technology & Electrical Engineering, Australian Defence Force Academy, UNSW |
| Publisher | Awarded by:University of New South Wales - Australian Defence Force Academy. School of Information Technology and Electrical Engineering |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | Copyright Jayan Ganesh Prasad, http://unsworks.unsw.edu.au/copyright |
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