A Synergistic Forecasting Model for High-Frequency Foreign Exchange Data

Ebrahimijam, S., Adaoglu, C., & Gokmenoglu, K. K. (2018). A Synergistic Forecasting Model for High-Frequency Foreign Exchange Data. Economic Computation and Economic Cybernetics Studies and Research, 52(1), 293–312. doi: 10.24818/18423264/52.1.18.18

20 Pages Posted: 24 Apr 2018

See all articles by Saeed Ebrahimijam

Saeed Ebrahimijam

Eastern Mediterranean University

Cahit Adaoglu

Eastern Mediterranean University - Department of Banking and Finance

Korhan Gokmenoglu

Eastern Mediterranean University

Date Written: March 19, 2018

Abstract

In this study, we develop a synergistic forecasting model using the information fusion approach. By using high frequency (one-minute) foreign exchange (FX) data, the model fuses two standalone models, namely the technical analysis structural model and the intra-market model. Subsequently, the outputs are fed into a unique modified extended Kalman filter whose functional parameters are estimated dynamically by using an artificial neural network. The synergistic model is tested on four currency pairs that dominate the FX market. In terms of forecasting performance, both root mean squared error and correct directional change performance results show that the synergistic model is statistically outperform and superior to each of the both standalone models as well as to the benchmark random walk model in the literature.

Keywords: Foreign exchange; Kalman filter; forecasting; high frequency; technical analysis indicators

JEL Classification: F31, G17, F37

Suggested Citation

Ebrahimijam, Saeed and Adaoglu, Cahit and Gokmenoglu, Korhan, A Synergistic Forecasting Model for High-Frequency Foreign Exchange Data (March 19, 2018). Ebrahimijam, S., Adaoglu, C., & Gokmenoglu, K. K. (2018). A Synergistic Forecasting Model for High-Frequency Foreign Exchange Data. Economic Computation and Economic Cybernetics Studies and Research, 52(1), 293–312. doi: 10.24818/18423264/52.1.18.18. Available at SSRN: https://ssrn.com/abstract=3156330

Saeed Ebrahimijam (Contact Author)

Eastern Mediterranean University ( email )

Famagusta
Cyprus

Cahit Adaoglu

Eastern Mediterranean University - Department of Banking and Finance ( email )

Famagusta North Cyprus, via Mersin-10
Turkey
+903926302116 (Phone)

HOME PAGE: http://www.emu.edu.tr

Korhan Gokmenoglu

Eastern Mediterranean University ( email )

Eastern Mediterranean University
Dept. of Banking and Finance
Famagusta, North Cyprus, via Mersin-10
Turkey

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