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The role of Japanese Candlestick in DVAR model
Xie Haibin1; Fan Kuikui2; Wang Shouyang3
AbstractThe decomposition-based vector autoregressive model (DVAR) provides a new framework for scrutinizing the efficiency of technical analysis in forecasting stock returns. However, its relationships with other technical indicators still remain unknown. This paper investigates the relationships of DVAR model with the Japanese Candlestick indicators using simulations, theoretical explanations and empirical studies. The main finding of this paper is that both lower and upper shadows in Japanese Candlestick Granger contribute to the DVAR model explanation power, and thus, providing useful information for improving the DVAR forecasts. This finding makes sense as it means that the information contained in the lower and upper shadows should be used when modeling the stock returns with DVAR. Empirical studies performed on China SSEC stock index demonstrate that DVAR model with upper and lower shadows as exogenous variables does have informative and valuable out-of-sample forecasts.
KeywordChinese stock market Japanese candlestick stock market forecast technical analysis
Funding ProjectNational Natural Science Foundation of China[71401033]
WOS Research AreaMathematics
WOS SubjectMathematics, Interdisciplinary Applications
WOS IDWOS:000358602600012
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Document Type期刊论文
Corresponding AuthorXie Haibin
Affiliation1.Univ Int Business & Econ, Res Ctr Appl Finance, Beijing 100029, Peoples R China
2.Shanghai Univ Finance & Econ, Sch Stat & Management, Shanghai 200433, Peoples R China
3.Chinese Acad Sci, Acad Math & Syst Sci, Inst Syst Sci, Beijing 100190, Peoples R China
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GB/T 7714
Xie Haibin,Fan Kuikui,Wang Shouyang. The role of Japanese Candlestick in DVAR model[J]. JOURNAL OF SYSTEMS SCIENCE & COMPLEXITY,2015,28(5):1177-1193.
APA Xie Haibin,Fan Kuikui,&Wang Shouyang.(2015).The role of Japanese Candlestick in DVAR model.JOURNAL OF SYSTEMS SCIENCE & COMPLEXITY,28(5),1177-1193.
MLA Xie Haibin,et al."The role of Japanese Candlestick in DVAR model".JOURNAL OF SYSTEMS SCIENCE & COMPLEXITY 28.5(2015):1177-1193.
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