Article ID: | iaor20031241 |
Country: | United Kingdom |
Volume: | 20 |
Issue: | 3 |
Start Page Number: | 181 |
End Page Number: | 196 |
Publication Date: | Apr 2001 |
Journal: | International Journal of Forecasting |
Authors: | Brooks Chris, Hinich Melvin J. |
Keywords: | finance & banking |
This paper proposes and implements a new methodology for forecasting time series, based on bicorrelations and cross-bicorrelations. It is shown that the forecasting technique arises as a natural extension of, and as a complement to, existing univariate and multivariate non-linearity tests. The formulations are essentially modified autoregressive or vector autoregressive models respectively, which can be estimated using ordinary least squares. The techniques are applied to a set of high-frequency exchange rate returns, and their out-of-sample forecasting performance is compared to that of other time series models.