Non-linear forecasting in high-frequency financial time series

F. Strozzi and J.M. Zaldívar

Physica A: Statistical Mechanics and its Applications, 2005, vol. 353, issue C, 463-479

Abstract: A new methodology based on state space reconstruction techniques has been developed for trading in financial markets. The methodology has been tested using 18 high-frequency foreign exchange time series. The results are in apparent contradiction with the efficient market hypothesis which states that no profitable information about future movements can be obtained by studying the past prices series. In our (off-line) analysis positive gain may be obtained in all those series. The trading methodology is quite general and may be adapted to other financial time series. Finally, the steps for its on-line application are discussed.

Keywords: Econophysics; Non-linear dynamics; Exchange rates; Trading (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:353:y:2005:i:c:p:463-479

DOI: 10.1016/j.physa.2005.01.047

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