Co-movement of precious metals and forecasting using scale by scale wavelet transform

Emrah Oral and Gazanfer Unal ()
Additional contact information
Emrah Oral: Financial Economics Graduate Program, Yeditepe University, Istanbul 34755, Turkey
Gazanfer Unal: Financial Economics Graduate Program, Yeditepe University, Istanbul 34755, Turkey

International Journal of Financial Engineering (IJFE), 2017, vol. 04, issue 01, 1-21

Abstract: In this paper, a new approach is proposed to improve forecasting performances. We analyze the co-movement of precious metals (daily data of gold, silver and platinum starting from July, 2011) using multiple wavelet coherence and determine the movement dependencies on frequency–time space. The data is split into frequencies using scale by scale continuous wavelet transform. All three time series retaining the same frequency scale are (i) selected, (ii) inversed and (ii) forecasted using multivariate model, Vector Auto Regressive Moving Average (VARMA). We conclude that the efficiency of VARMA forecasting is substantially increased because of same frequency highly correlated time series obtained by using scale by scale wavelet transform. Moreover, the direction of price shift (increasing/decreasing trend) is prospected to an adequately distinguishable degree.

Keywords: Wavelet transform; multiple wavelet coherence; co-movement; vector auto regressive moving average; forecast (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2424786317500074
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijfexx:v:04:y:2017:i:01:n:s2424786317500074

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2424786317500074

Access Statistics for this article

International Journal of Financial Engineering (IJFE) is currently edited by George Yuan

More articles in International Journal of Financial Engineering (IJFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().