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Erschienen in:
2008 | OriginalPaper | Buchkapitel
A Hidden Markov Model Approach to Classify and Predict the Sign of Financial Local Trends
verfasst von : Manuele Bicego, Enrico Grosso, Edoardo Otranto
Erschienen in: Structural, Syntactic, and Statistical Pattern Recognition
Verlag: Springer Berlin Heidelberg
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In the field of financial time series analysis it is widely accepted that the returns (price variations) are unpredictable in the long period [1]; nevertheless, this unappealing constraint could be somehow relaxed if
sufficiently short
time intervals are considered. In this paper this alternative scenario is investigated with a novel methodology, aimed at analyzing short (local) financial trends for predicting their sign (increase or decrease). This peculiar problem needs specific models – different from standard techniques used for estimating the volatility or the returns – able to capture the asymmetries between increase and decrease periods in the short time. This is achieved by modeling directly the signs of the local trends using
two
separate Hidden Markov models, one for positive and one for negative trends. The approach has been tested with different financial indexes, with encouraging results also in comparison with standard methods.