Title: A hybrid ARIMA-EGARCH and Artificial Neural Network model in stock market forecasting: evidence for India and the USA

Authors: Manish Kumar; M. Thenmozhi

Addresses: Indian Institute of Technology Madras, Department of Management Studies, Chennai 600036, India. ' Indian Institute of Technology Madras, Department of Management Studies, Chennai 600036, India

Abstract: This study develops a hybrid model that combines Autoregressive Integrated Moving Average (ARIMA), Exponential GARCH (EGARCH) and Artificial Neural Network (ANN) to predict the daily returns of S&P CNX Nifty and S&P 500 indices by modifying Zhang 's (2003) approach. The performance of the hybrid ARIMA-EGARCH-ANN model is benchmarked against the ARIMA-EGARCH and ANN models. The empirical evidence provides superiority of the hybrid ARIMA-EGARCH-ANN model in terms of the traditional forecasting accuracy measures and Sign and directional change and delivers consistent results for the two time series. This endorses hybrid model robustness and provides its practical use in formulating a strategy for trading in the S&P 500 and Nifty indices.

Keywords: ARIMA; autoregressive integrated moving average; ANN; artificial neural networks; stock market forecasting; stock market trading; India; USA; United States; hybrid modelling; stock markets.

DOI: 10.1504/IJBEM.2012.046241

International Journal of Business and Emerging Markets, 2012 Vol.4 No.2, pp.160 - 178

Received: 30 Dec 2010
Accepted: 10 Jun 2011

Published online: 05 Mar 2012 *

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