A Hidden Markov Chain Modeling of Shanghai Stock Index
Gong Jian, Chenghu Ma · 2012
This paper develops a model of financial forecasting using hidden Markov chains. Empirical ana- lysis was carried out with respect to Shanghai Stock Exchange Index (SSEI) using daily data for the period from 2002.12.17-2011.3.18 (2000 samples). A three dimensional hidden Markov chain is identified to fit the data in the sampling period. An altered 10-day weighted average method was proposed, and was found to be useful for out-of-sample forecasting.