Forecasting FTSE Index Using Global Stock Markets

Jose G. Vega, Jan M. Smolarski

Abstract


Using data from July 1997 to July 2007, we examine if the FTSE index is affected by the past behavior of the DOW, DAX, NIKKEI, Hang Seng and Shanghai indices. We compare three different methods of estimating regression parameters. The results show that the FTSE lagged variable and the NIKKEI and DOW past performance are good indicators of the future performance of the FTSE. The models produce different predictive values but the effect of the variables is the same when examining the direction of the coefficients. Both the Newey-West OLS and GARCH models are better predictive models than the OLS with a standard error. The predictive power of the model increases as a result of allowing time varying variances.


Full Text: PDF DOI: 10.5539/ijef.v4n4p3

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This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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