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APPLING GREY FORECASTING METHOD TO FORECAST THE PORTFOLIO’S RATE OF RETURN IN STOCK MARKET OF IRAN

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Author(s): Ali Mohammadi | Sara Zeinodin Zade

Journal: Australian Journal of Business and Management Research
ISSN 1839-0846

Volume: 1;
Issue: 7;
Start page: 01;
Date: 2011;
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Keywords: Grey model | Stock market | Forecasting | time series

ABSTRACT
Stock market is one of the most important investment market, which influenced by many factors, therefore it needs a robust and accurate forecasting. In this study ,grey model used as a forecasting method and examined if it is the most reliable forecasting method in comparison of time series method. The information of portfolio’s rate of return is gathered from 50 accepted companies in Tehran stock market, which were announced as the best companies last year. Mean Square of the errors (MSE) is computed by different value of α in grey model which could be varied between .1 to .9 ,to examined if α=.5 is the best value that our model could take .Then the predictive ability of the model is compared with different type of time series based forecasting methods Experimental results confirm forecasting accuracy of grey model. Tracking signal is computed for grey model to see whether grey model forecasting is in control or not. At the last portfolio’s rate of return is forecasted for next periods.

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