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Abstract Details

Activity Number: 344
Type: Contributed
Date/Time: Tuesday, July 31, 2012 : 10:30 AM to 12:20 PM
Sponsor: Business and Economic Statistics Section
Abstract - #305987
Title: Functional Prediction of Intraday Cumulative Returns
Author(s): Xi Zhang*+ and Piotr Stefan Kokoszka
Companies: Utah State University and Colorado State University
Address: 6 Aggie Village, Logan, UT, 84341, United States
Keywords: Functional linear prediction ; Intraday returns
Abstract:

We de fine cumulative intraday returns and consider their prediction from such returns on a market index. The returns we study are de fined as curves in a functional space and are similar to daily asset price curves. We propose several functional regression models which can be viewed as extensions of the Capital Asset Pricing Model to intraday returns defi ned as curves. After deriving parameter estimates and prediction functions for these models, we compare their prediction errors by application to cumulative intraday returns of large US corporations. We fi nd that complex functional regression models do not perform better than a simple model. In particular, we fi nd that modeling error dependence does not improve forecasts.


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