EconPapers    
Economics at your fingertips  
 

Hybrid ARFIMA Wavelet Artificial Neural Network Model for DJIA Index Forecasting

Heni Boubaker, Giorgio Canarella, Rangan Gupta () and Stephen Miller ()
Additional contact information
Heni Boubaker: International University of Rabat, BEAR LAB, Technopolis Rabat-Shore Rocade Rabat-Sale, Morocco

No 202056, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper proposes a hybrid modelling approach for forecasting returns and volatilities of the stock market. The model, called ARFIMA-WLLWNN model, integrates the advantages of the ARFIMA model, the wavelet decomposition technique (namely, the discrete MODWT with Daubechies least asymmetric wavelet filter) and artificial neural network (namely, the LLWNN neural network). The model develops through a two-phase approach. In phase one, a wavelet decomposition improves the forecasting accuracy of the LLWNN neural network, resulting in the Wavelet Local Linear Wavelet Neural Network (WLLWNN) model. The Back Propagation (BP) and Particle Swarm Optimization (PSO) learning algorithms optimize the WLLWNN structure. In phase two, the residuals of an ARFIMA model of the conditional mean become the input to the WLLWNN model. The hybrid ARFIMA-WLLWNN model is evaluated using daily closing prices for the Dow Jones Industrial Average (DJIA) index over 01/01/2010 to 02/11/2020. The experimental results indicate that the PSO-optimized version of the hybrid ARFIMA-WLLWNN outperforms the LLWNN, WLLWNN, ARFIMA-LLWNN, and the ARFIMA-HYAPARCH models and provides more accurate out-of-sample forecasts over validation horizons of one, five and twenty-two days.

Keywords: Wavelet decomposition; WLLWNN; Neural network; ARFIMA; HYGARCH (search for similar items in EconPapers)
JEL-codes: C45 C58 G17 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2020-06
New Economics Papers: this item is included in nep-big, nep-cmp, nep-ets, nep-for and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.up.ac.za/media/shared/61/WP/wp_2020_56.zp190917.pdf (application/pdf)

Related works:
Working Paper: Hybrid ARFIMA Wavelet Artificial Neural Network Model for DJIA Index Forecasting (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202056

Access Statistics for this paper

More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().

 
Page updated 2020-11-28
Handle: RePEc:pre:wpaper:202056