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Abstract Details
Activity Number:
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344
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Type:
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Contributed
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Date/Time:
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Tuesday, July 31, 2012 : 10:30 AM to 12:20 PM
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Sponsor:
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Business and Economic Statistics Section
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Abstract - #305987 |
Title:
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Functional Prediction of Intraday Cumulative Returns
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Author(s):
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Xi Zhang*+ and Piotr Stefan Kokoszka
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Companies:
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Utah State University and Colorado State University
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Address:
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6 Aggie Village, Logan, UT, 84341, United States
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Keywords:
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Functional linear prediction ;
Intraday returns
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Abstract:
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We define cumulative intraday returns and consider their prediction from such returns on a market index. The returns we study are defined 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 defined 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 find that complex functional regression models do not perform better than a simple model. In particular, we find that modeling error dependence does not improve forecasts.
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