FORECASTING THE DOW JONES RATE OF CHANGE BY USING VECTOR AUTO-REGRESSION

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Nissim Ben-David

Abstract

In this paper I used VAR Technique and estimated an equation that enables us to forecast future expected changes in the Dow Jones.Surprisingly, I found that small lags in the Dow Jones are not significant, while very distant lags are significant and can explain a large amount of the variance in the rate of change of the Dow Jones. Comparing actual to fitted values, I found that in 10 out of 11 predictions the forecasts lie within the confidence interval of the prediction.

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References

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