European exchange trading funds trading with locally weighted support vector regression

Sermpinis, G., Stasinakis, C., Rosillo, R. and de la Fuente, D. (2017) European exchange trading funds trading with locally weighted support vector regression. European Journal of Operational Research, 258(1), pp. 372-384. (doi:10.1016/j.ejor.2016.09.005)

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Abstract

In this paper, two different Locally Weighted Support Vector Regression (wSVR) algorithms are generated and applied to the task of forecasting and trading five European Exchange Traded Funds. The trading application covers the recent European Monetary Union debt crisis. The performance of the proposed models is benchmarked against traditional Support Vector Regression (SVR) models. The Radial Basis Function, the Wavelet and the Mahalanobis kernel are explored and tested as SVR kernels. Finally, a novel statistical SVR input selection procedure is introduced based on a principal component analysis and the Hansen, Lunde, and Nason (2011) model confidence test. The results demonstrate the superiority of the wSVR models over the traditional SVRs and of the v-SVR over the ε-SVR algorithms. We note that the performance of all models varies and considerably deteriorates in the peak of the debt crisis. In terms of the kernels, our results do not confirm the belief that the Radial Basis Function is the optimum choice for financial series.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Stasinakis, Dr Charalampos and Sermpinis, Dr Georgios
Authors: Sermpinis, G., Stasinakis, C., Rosillo, R., and de la Fuente, D.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
College of Social Sciences > Adam Smith Business School > Economics
Journal Name:European Journal of Operational Research
Publisher:Elsevier
ISSN:0377-2217
ISSN (Online):1872-6860
Published Online:22 September 2016
Copyright Holders:Copyright © 2016 Elsevier B.V
First Published:First published in European Journal of Operational Research 258(1):372-384
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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