Benchmark Models Theory And Methodology

The premise of this chapter is to examine the use of regression models in EUR/USD forecasting and trading models. In particular, the performance of NNR models is compared with other traditional forecasting techniques to ascertain their potential added value as a forecasting tool. Such methods include ARMA modelling, logit estimation, Moving Average Convergence/Divergence (MACD) technical models, and a naive strategy. Except for the straightforward naive strategy, all benchmark models were estimated on our insample period. As all of these methods are well documented in the literature, they are simply outlined below.

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