Prediction in chaotic time series: methods and comparisons with an application to financial intra-day data

D. Guegan and L. Mercier

The European Journal of Finance, 2005, vol. 11, issue 2, 137-150

Abstract: Different prediction methods for chaotic deterministic systems are compared. Two methods of reconstructing the dynamics of the systems are considered with a view to producing a profitable trading model. The methods developed are the 'nearest neighbours' method and the 'radial basis functions' method. The optimal prediction horizon according to the sampling time step, and a reliable method to measure the prediction error are discussed. These methods are applied to the intra-day series of exchange rates, namely DEM/FRF. Developments concerning the importance of noise when chaotic systems are studied are provided.

Keywords: Chaotic systems; nearest neighbors; prediction radial basis functions (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (6)

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DOI: 10.1080/13518470110074846

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