An information-theoretic approach for forecasting interval-valued SP500 daily returns

T.S. Tuang Buansing, Amos Golan and Aman Ullah

International Journal of Forecasting, 2020, vol. 36, issue 3, 800-813

Abstract: We develop an iterative and efficient information-theoretic estimator for forecasting interval-valued data, and use our estimator to forecast the SP500 returns up to five days ahead using moving windows. Our forecasts are based on 13 years of data. We show that our estimator is superior to its competitors under all of the common criteria that are used to evaluate forecasts of interval data. Our approach differs from other methods that are used to forecast interval data in two major ways. First, rather than applying the more traditional methods that use only certain moments of the intervals in the estimation process, our estimator uses the complete sample information. Second, our method simultaneously selects the model (or models) and infers the model’s parameters. It is an iterative approach that imposes minimal structure and statistical assumptions.

Keywords: Entropy; Information; Information theoretic methods; Interval-valued data; Iterative process; Model selection; SP500 index (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:36:y:2020:i:3:p:800-813

DOI: 10.1016/j.ijforecast.2019.09.003

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