Time series analysis and back testing

Table of content

Time series analysis and back testing. 1

Introduction. 3

The objective of the study. 3

Financial time series analysis. 3

2.3         Linear time series models. 4

2.4         Non – linear models. 7

2.5         Short-time series. 9

2.6         Autoregressive (AR) model for short time series. 10

2.6.1         Model selection for AR process in short time series. 10

2.6.2         Estimation of AR parameters in short time series. 10

2.7        Maximum Likelihood Estimation of the ARFIMA model 12

METHODOLOGY. 14

Data. 14

Data analysis. 14

RESULTS. 15

References. 20

The appendix. 26

R-codes. 26

Introduction

This project will deal with analysis of stock market prices though a time series models. The study will use data from weir group of companies. The study will use ARMA model accessing the characteristics of the stock price data. The R- program will be used in data analysis

The objective of the study

1. To fit appropriate short time series ARMA models to the weir group of companies’ Stock prices data.
2. To compare the efficiency of the fitted models for short time series to the conventional models

Financial time series analysis

Many researchers have focused on financial time series in the last years (Mantegna and Stanley, 1999). The key focus of time series in finance is to regroup the analysis of finance data and classify then based on their characteristic. This also help the researchers to model the financial data using the financial time series model. In doing this, the research is able to obtain a optimal portfolios (Turiel and Perez-Vicente 2002). Further the researcher able to scale the invariance of fluctuating return and arrive at reasonable decisions (Mantegna and Stanley, 1995; Galluccio et al, 1997). The cumulative distribution in fluctuation of the stock price has a long tail. The distribution has been indicated the properties of robustness, with constant form of time scale of up to several days.

There are a lot of  complexity and dynamic in Stock markets. Accourding to Klassen (2005) the errors ( random walk) in stock prices are independent but there are different view by traders and academicians who suggest that they can be predicted. The technical and the fundamental aspect are the major aspect of stock predictions. In studying the fundamental analysis, the measure on………..

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