EXTENDED DAILY EXCHANGE RATES FORECASTS USING WAVELET TEMPORAL RESOLUTIONS

Mak Kaboudan ()
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Mak Kaboudan: School of Business, University of Redlands, 1200 East Colton Avenue, Redlands, California 92373, USA

New Mathematics and Natural Computation (NMNC), 2005, vol. 01, issue 01, 79-107

Abstract: Applying genetic programming and artificial neural networks to raw as well as wavelet-transformed exchange rate data showed that genetic programming may have good extended forecasting abilities. Although it is well known that most predictions of exchange rates using many alternative techniques could not deliver better forecasts than the random walk model, in this paper employing natural computational strategies to forecast three different exchange rates produced two extended forecasts (that go beyond one-step-ahead) that are better than naïve random walk predictions. Sixteen-step-ahead forecasts obtained using genetic programming outperformed the one- and sixteen-step-ahead random walk US dollar/Taiwan dollar exchange rate predictions. Further, sixteen-step-ahead forecasts of the wavelet-transformed US dollar/Japanese Yen exchange rate also using genetic programming outperformed the sixteen-step-ahead random walk predictions of the exchange rate. However, random walk predictions of the US dollar/British pound exchange rate outperformed all forecasts obtained using genetic programming. Random walk predictions of the same three exchange rates employing raw and wavelet-transformed data also outperformed all forecasts obtained using artificial neural networks.

Keywords: Genetic programming; artificial neural networks; Haar wavelets (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S1793005705000056

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