Forecasting the Dow Jones Rate of Change by Using Vector Auto-Regression

Nissim Ben David

Journal of Prediction Markets, 2010, vol. 4, issue 1, 1-5

Abstract: In this paper I used VAR Technique and estimated an equation that enables us to forecast future expected changes in the Dow Jones. Surprisingly, I found that small lags in the Dow Jones are not significant, while very distant lags are significant and can explain a large amount of the variance in the rate of change of the Dow Jones. Comparing actual to fitted values, I found that in 10 out of 11 predictions the forecasts lie within the confidence interval of the prediction.

Date: 2010
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