Forecast Performance of the Taiwan Weighted Stock Index

Deng-Yuan Ji (), Cheng Few Lee and Hsiao-Yin Chen ()
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Deng-Yuan Ji: Department of Marketing, Kainan University, Taiwan
Hsiao-Yin Chen: Department of Business and Entrepreneurial Management, Kainan University, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2015, vol. 18, issue 03, 1-16

Abstract: This research introduces the following to establish a Taiwan Weighted stock index (TAIEX) prediction model: intervention analysis integrated into the ARIMA–GARCH model, error correction model (ECM), intervention analysis integrated into the transfer function model, the simple average combination forecasting model, and the minimum error combination forecasting model. The results show that intervention analysis integrated into the transfer function model yields a more accurate prediction model than ECM and intervention analysis integrated into the ARIMA–GARCH model. The minimum error combination forecasting model can improve prediction accuracy much better than non-combination models and also maintain robustness. Intervention analysis integrated into the transfer function model shows that the TAIEX is affected by external factors, the INDU, the exchange rate, and the consumer price index; therefore, facing the different issues of the TAIEX, the government could pursue some macroeconomic policies to reach the goals of policies.

Keywords: Transfer function model; intervention; combination forecasting model (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1142/S0219091515500174

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