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Forecasting Financial Markets
The forecasting of financial markets has engaged the attention of market professionals and academic economists and statisticians for many years, and has also attracted the interest of numerous ‘amateur’ investors. This book brings together key papers in this wide field. After considering some of the earliest attempts at forecasting, it provides an insight into the theoretical underpinnings of the subject, investigates the random walk model, and examines various financial markets, volatility and density forecasting, the forecasting of extreme events, trading rules, technical analysis and high frequency data.
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Contributors
Contents
More Information
The forecasting of financial markets has engaged the attention of market professionals and academic economists and statisticians for many years, and has also attracted the interest of numerous ‘amateur’ investors. This book brings together key papers in this wide field. After considering some of the earliest attempts at forecasting, it provides an insight into the theoretical underpinnings of the subject, investigates the random walk model, and examines various financial markets, volatility and density forecasting, the forecasting of extreme events, trading rules, technical analysis and high frequency data.
Contributors
53 articles, dating from 1934 to 2000
Contributors include: F. Diebold, E. Fama, C. Granger, M. Kendall, S. LeRoy, A. Lo, B. Mandelbrot, R. Merton, H. Pesaran, P. Samuelson
Contributors include: F. Diebold, E. Fama, C. Granger, M. Kendall, S. LeRoy, A. Lo, B. Mandelbrot, R. Merton, H. Pesaran, P. Samuelson
Contents
Contents:
Volume I:
Acknowledgements
Introduction Terence C. Mills
PART I EARLY ATTEMPTS
1. Alfred Cowles (1944), ‘Stock Market Forecasting’
2. Holbrook Working (1934), ‘A Random-Difference Series for Use in the Analysis of Time Series’
3. M.G. Kendall (1953), ‘The Analysis of Economic Time Series – Part 1: Prices’
4. M.F.M. Osborne (1962), ‘Periodic Structure in the Brownian Motion of Stock Prices’
5. Sidney S. Alexander (1964), ‘Price Movements in Speculative Markets: Trends or Random Walks, Number 2’
PART II THEORETICAL UNDERPINNINGS
6. Benoit Mandelbrot (1966), ‘Forecasts of Future Prices, Unbiased Markets, and "Martingale" Models’
7. Paul A. Samuelson (1973), ‘Proof That Properly Discounted Present Values of Assets Vibrate Randomly’
8. Stephen F. LeRoy (1989), ‘Efficient Capital Markets and Martingales’
PART III TESTING THE RANDOM WALK MODEL
9. Victor Niederhoffer and M.F.M. Osborne (1966), ‘Market Making and Reversal on the Stock Exchange’
10. Michael D. Godfrey, Clive W.J. Granger and Oskar Morgenstern (1964), ‘The Random-Walk Hypothesis of Stock Market Behavior’
11. Stephen J. Taylor (1980), ‘Conjectured Models for Trends in Financial Prices, Tests and Forecasts’
12. Matthew Richardson and James H. Stock (1989), ‘Drawing Inferences from Statistics Based on Multiyear Asset Returns’
PART IV STOCK MARKETS
13. Eugene F. Fama (1972), ‘Components of Investment Performance’
14. Robert C. Merton (1981), ‘On Market Timing and Investment Performance. I. An Equilibrium Theory of Value for Market Forecasts’
15. Roy D. Henriksson and Robert C. Merton (1981), ‘On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills’
16. Cheng-few Lee and Shafiqur Rahman (1990), ‘Market Timing, Selectivity, and Mutual Fund Performance: An Empirical Investigation’
17. William Breen, Lawrence R. Glosten and Ravi Jagannathan (1989), ‘Economic Significance of Predictable Variations in Stock Index Returns’
18. Wayne E. Ferson and Robert A. Korajczyk (1995), ‘Do Arbitrage Pricing Models Explain the Predictability of Stock Returns?’
19. Shmuel Kandel and Robert F. Stambaugh (1996), ‘On the Predictability of Stock Returns: An Asset-Allocation Perspective’
20. M. Hashem Pesaran and Allan Timmermann (1995), ‘Predictability of Stock Returns: Robustness and Economic Significance’
21. M. Hashem Pesaran and Allan Timmermann (2000), ‘A Recursive Modelling Approach to Predicting UK Stock Returns’
PART V FOREIGN EXCHANGE MARKETS
22. Alan C. Stockman (1987), ‘Economic Theory and Exchange Rate Forecasts’
23. Paul Boothe and Debra Glassman (1987), ‘Comparing Exchange Rate Forecasting Models: Accuracy versus Profitability’
24. Charles Goodhart (1988), ‘The Foreign Exchange Market: A Random Walk with a Dragging Anchor’
25. Ronald MacDonald and Mark P. Taylor (1993), ‘The Monetary Approach to the Exchange Rate: Rational Expectations, Long-Run Equilibrium, and Forecasting’
26. Nelson C. Mark (1995), ‘Exchange Rates and Fundamentals: Evidence on Long-Horizon Predictability’
Name Index
Volume II:
Acknowledgements
An introduction by the editor to both volumes appears in Volume I
PART I OTHER FINANCIAL MARKETS
1. Donald B. Keim and Robert F. Stambaugh (1986), ‘Predicting Returns in the Stock and Bond Markets’
2. Andrew W. Lo and A. Craig MacKinlay (1997), ‘Maximizing Predictability in the Stock and Bond Markets’
3. Hendrik Bessembinder and Kalok Chan (1992), ‘Time-varying Risk Premia and Forecastable Returns in Futures Markets’
4. Alvaro Escribano and Clive W.J. Granger (1998), ‘Investigating the Relationship between Gold and Silver Prices’
PART II VOLATILITY FORECASTING
5. Stephen J. Taylor (1987), ‘Forecasting the Volatility of Currency Exchange Rates’
6. Philippe Jorion (1995), ‘Predicting Volatility in the Foreign Exchange Market’
7. Torben G. Andersen and Tim Bollerslev (1998), ‘Answering the Skeptics: Yes, Standard Volatility Models do Provide Accurate Forecasts’
8. James W. Taylor (1999), ‘Evaluating Volatility and Interval Forecasts’
PART III LONG MEMORY, DENSITY FORECASTS AND FORECASTING EXTREME EVENTS
9. Benoit Mandelbrot (1963), ‘New Methods in Statistical Economics’
10. Andrew W. Lo (1997), ‘Fat Tails, Long Memory, and the Stock Market Since the 1960’s’
11. Dennis W. Jansen and Casper G. de Vries (1991), ‘On the Frequency of Large Stock Returns: Putting Booms and Busts into Perspective’
12. Francis X. Diebold, Jinyong Hahn and Anthony S. Tay (1999), ‘Multivariate Density Forecast Evaluation and Calibration in Financial Risk Management: High-Frequency Returns on Foreign Exchange’
PART IV FORECASTING USING NONLINEAR MODELS
13. Francis X. Diebold and James A. Nason (1990), ‘Nonparametric Exchange Rate Prediction?’
14. Charles Engel (1994), ‘Can the Markov Switching Model Forecast Exchange Rates?’
15. Blake LeBaron (1994), ‘Chaos and Nonlinear Forecastability in Economics and Finance’
16. Stephen J. Brown, William N. Goetzmann and Alok Kumar (1998), ‘The Dow Theory: William Peter Hamilton’s Track Record Reconsidered’
17. Min Qi and G.S. Maddala (1999), ‘Economic Factors and the Stock Market: A New Perspective’
18. Clive W.J. Granger and Chor-Yiu Sin (2000), ‘Modelling the Absolute Returns of Different Stock Indices: Exploring the Forecastability of an Alternative Measure of Risk’
PART V TRADING RULES AND TECHNICAL ANALYSIS
19. Salih N. Neftci (1991), ‘Naïve Trading Rules in Financial Markets and Wiener-Kolmogorov Prediction Theory: A Study of "Technical Analysis"’
20. William Brock, Josef Lakonishok and Blake LeBaron (1992), ‘Simple Technical Trading Rules and the Stochastic Properties of Stock Returns’
21. Mark P. Taylor and Helen Allen (1992), ‘The Use of Technical Analysis in the Foreign Exchange Market’
22. Richard M. Levich and Lee R. Thomas, III (1993), ‘The Significance of Technical Trading-Rule Profits in the Foreign Exchange Market: A Bootstrap Approach’
23. Ramazan Gençay (1998), ‘The Predictability of Security Returns with Simple Technical Trading Rules’
24. Andrew W. Lo, Harry Mamaysky and Jiang Wang (2000), ‘Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation’
PART VI HIGH FREQUENCY FORECASTING
25. C.A.E. Goodhart and M. Giugale (1993), ‘From Hour to Hour in the Foreign Exchange Market’
26. Timothy Falcon Crack and Olivier Ledoit (1996), ‘Robust Structure Without Predictability: The "Compass Rose" Pattern of the Stock Market’
27. Robert F. Engle and Jeffrey R. Russell (1997), ‘Forecasting the Frequency of Changes in Quoted Foreign Exchange Prices with the Autoregressive Conditional Duration Model’
Name Index
Volume I:
Acknowledgements
Introduction Terence C. Mills
PART I EARLY ATTEMPTS
1. Alfred Cowles (1944), ‘Stock Market Forecasting’
2. Holbrook Working (1934), ‘A Random-Difference Series for Use in the Analysis of Time Series’
3. M.G. Kendall (1953), ‘The Analysis of Economic Time Series – Part 1: Prices’
4. M.F.M. Osborne (1962), ‘Periodic Structure in the Brownian Motion of Stock Prices’
5. Sidney S. Alexander (1964), ‘Price Movements in Speculative Markets: Trends or Random Walks, Number 2’
PART II THEORETICAL UNDERPINNINGS
6. Benoit Mandelbrot (1966), ‘Forecasts of Future Prices, Unbiased Markets, and "Martingale" Models’
7. Paul A. Samuelson (1973), ‘Proof That Properly Discounted Present Values of Assets Vibrate Randomly’
8. Stephen F. LeRoy (1989), ‘Efficient Capital Markets and Martingales’
PART III TESTING THE RANDOM WALK MODEL
9. Victor Niederhoffer and M.F.M. Osborne (1966), ‘Market Making and Reversal on the Stock Exchange’
10. Michael D. Godfrey, Clive W.J. Granger and Oskar Morgenstern (1964), ‘The Random-Walk Hypothesis of Stock Market Behavior’
11. Stephen J. Taylor (1980), ‘Conjectured Models for Trends in Financial Prices, Tests and Forecasts’
12. Matthew Richardson and James H. Stock (1989), ‘Drawing Inferences from Statistics Based on Multiyear Asset Returns’
PART IV STOCK MARKETS
13. Eugene F. Fama (1972), ‘Components of Investment Performance’
14. Robert C. Merton (1981), ‘On Market Timing and Investment Performance. I. An Equilibrium Theory of Value for Market Forecasts’
15. Roy D. Henriksson and Robert C. Merton (1981), ‘On Market Timing and Investment Performance. II. Statistical Procedures for Evaluating Forecasting Skills’
16. Cheng-few Lee and Shafiqur Rahman (1990), ‘Market Timing, Selectivity, and Mutual Fund Performance: An Empirical Investigation’
17. William Breen, Lawrence R. Glosten and Ravi Jagannathan (1989), ‘Economic Significance of Predictable Variations in Stock Index Returns’
18. Wayne E. Ferson and Robert A. Korajczyk (1995), ‘Do Arbitrage Pricing Models Explain the Predictability of Stock Returns?’
19. Shmuel Kandel and Robert F. Stambaugh (1996), ‘On the Predictability of Stock Returns: An Asset-Allocation Perspective’
20. M. Hashem Pesaran and Allan Timmermann (1995), ‘Predictability of Stock Returns: Robustness and Economic Significance’
21. M. Hashem Pesaran and Allan Timmermann (2000), ‘A Recursive Modelling Approach to Predicting UK Stock Returns’
PART V FOREIGN EXCHANGE MARKETS
22. Alan C. Stockman (1987), ‘Economic Theory and Exchange Rate Forecasts’
23. Paul Boothe and Debra Glassman (1987), ‘Comparing Exchange Rate Forecasting Models: Accuracy versus Profitability’
24. Charles Goodhart (1988), ‘The Foreign Exchange Market: A Random Walk with a Dragging Anchor’
25. Ronald MacDonald and Mark P. Taylor (1993), ‘The Monetary Approach to the Exchange Rate: Rational Expectations, Long-Run Equilibrium, and Forecasting’
26. Nelson C. Mark (1995), ‘Exchange Rates and Fundamentals: Evidence on Long-Horizon Predictability’
Name Index
Volume II:
Acknowledgements
An introduction by the editor to both volumes appears in Volume I
PART I OTHER FINANCIAL MARKETS
1. Donald B. Keim and Robert F. Stambaugh (1986), ‘Predicting Returns in the Stock and Bond Markets’
2. Andrew W. Lo and A. Craig MacKinlay (1997), ‘Maximizing Predictability in the Stock and Bond Markets’
3. Hendrik Bessembinder and Kalok Chan (1992), ‘Time-varying Risk Premia and Forecastable Returns in Futures Markets’
4. Alvaro Escribano and Clive W.J. Granger (1998), ‘Investigating the Relationship between Gold and Silver Prices’
PART II VOLATILITY FORECASTING
5. Stephen J. Taylor (1987), ‘Forecasting the Volatility of Currency Exchange Rates’
6. Philippe Jorion (1995), ‘Predicting Volatility in the Foreign Exchange Market’
7. Torben G. Andersen and Tim Bollerslev (1998), ‘Answering the Skeptics: Yes, Standard Volatility Models do Provide Accurate Forecasts’
8. James W. Taylor (1999), ‘Evaluating Volatility and Interval Forecasts’
PART III LONG MEMORY, DENSITY FORECASTS AND FORECASTING EXTREME EVENTS
9. Benoit Mandelbrot (1963), ‘New Methods in Statistical Economics’
10. Andrew W. Lo (1997), ‘Fat Tails, Long Memory, and the Stock Market Since the 1960’s’
11. Dennis W. Jansen and Casper G. de Vries (1991), ‘On the Frequency of Large Stock Returns: Putting Booms and Busts into Perspective’
12. Francis X. Diebold, Jinyong Hahn and Anthony S. Tay (1999), ‘Multivariate Density Forecast Evaluation and Calibration in Financial Risk Management: High-Frequency Returns on Foreign Exchange’
PART IV FORECASTING USING NONLINEAR MODELS
13. Francis X. Diebold and James A. Nason (1990), ‘Nonparametric Exchange Rate Prediction?’
14. Charles Engel (1994), ‘Can the Markov Switching Model Forecast Exchange Rates?’
15. Blake LeBaron (1994), ‘Chaos and Nonlinear Forecastability in Economics and Finance’
16. Stephen J. Brown, William N. Goetzmann and Alok Kumar (1998), ‘The Dow Theory: William Peter Hamilton’s Track Record Reconsidered’
17. Min Qi and G.S. Maddala (1999), ‘Economic Factors and the Stock Market: A New Perspective’
18. Clive W.J. Granger and Chor-Yiu Sin (2000), ‘Modelling the Absolute Returns of Different Stock Indices: Exploring the Forecastability of an Alternative Measure of Risk’
PART V TRADING RULES AND TECHNICAL ANALYSIS
19. Salih N. Neftci (1991), ‘Naïve Trading Rules in Financial Markets and Wiener-Kolmogorov Prediction Theory: A Study of "Technical Analysis"’
20. William Brock, Josef Lakonishok and Blake LeBaron (1992), ‘Simple Technical Trading Rules and the Stochastic Properties of Stock Returns’
21. Mark P. Taylor and Helen Allen (1992), ‘The Use of Technical Analysis in the Foreign Exchange Market’
22. Richard M. Levich and Lee R. Thomas, III (1993), ‘The Significance of Technical Trading-Rule Profits in the Foreign Exchange Market: A Bootstrap Approach’
23. Ramazan Gençay (1998), ‘The Predictability of Security Returns with Simple Technical Trading Rules’
24. Andrew W. Lo, Harry Mamaysky and Jiang Wang (2000), ‘Foundations of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation’
PART VI HIGH FREQUENCY FORECASTING
25. C.A.E. Goodhart and M. Giugale (1993), ‘From Hour to Hour in the Foreign Exchange Market’
26. Timothy Falcon Crack and Olivier Ledoit (1996), ‘Robust Structure Without Predictability: The "Compass Rose" Pattern of the Stock Market’
27. Robert F. Engle and Jeffrey R. Russell (1997), ‘Forecasting the Frequency of Changes in Quoted Foreign Exchange Prices with the Autoregressive Conditional Duration Model’
Name Index
