{"id":2066261,"date":"2017-06-14T14:23:19","date_gmt":"2017-06-14T08:53:19","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=2066261"},"modified":"2017-06-14T14:23:19","modified_gmt":"2017-06-14T08:53:19","slug":"can-nifty-modeled-using-arima","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2017\/06\/14\/can-nifty-modeled-using-arima\/","title":{"rendered":"Can NIFTY be modeled using ARIMA?"},"content":{"rendered":"<p>A recent paper on SSR, <em>Testing Random Walk Hypothesis: An Empirical Analysis of National Stock Exchange Indices<\/em> (<a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2979108\" target=\"_blank\">pdf<\/a>), had me wondering if the NIFTY could indeed be modeled as an ARIMA(1,1,1) process as the author asserts.<\/p>\n<p>As a first step, I wanted to check if ARIMA(1,1,1) is a given. What would be best fit be across rolling windows of different sizes? Turns out that for the most part, the best fit is ARIMA(0,0,0) aka, <a href=\"https:\/\/stats.stackexchange.com\/questions\/236566\/how-to-interpret-arima0-0-0\/236584\" target=\"_blank\">white noise<\/a>. And the second best fits apply less than 20% of the time (<a href=\"https:\/\/github.com\/stockviz\/notebooks\/blob\/master\/ARIMA%20on%20NIFTY.ipynb\" target=\"_blank\">Code and Results<\/a>.)<\/p>\n<p>Second, I wanted to check if ARIMA(1,1,1) has any forecasting ability. It does appear so (<a href=\"https:\/\/github.com\/stockviz\/notebooks\/blob\/master\/ARIMA(1%2C1%2C1)%20on%20NIFTY.ipynb\" target=\"_blank\">Code and Results<\/a>.)<\/p>\n<p>Buy &amp; Hold Annualized return: 13.25% vs. Long\/short NIFTY with different look-backs:<br \/>\n200: 16.75%; 500: 17.41% and 1000: 14.28%<br \/>\n<small><span class='muted'>*Not including transaction costs.<\/span><\/small><\/p>\n<p>Although there is a slight advantage in using an ARIMA(1,1,1) model, I have a hard time reconciling the first set of results with the second. The advantage could very well be random. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>A recent paper on SSR, Testing Random Walk Hypothesis: An Empirical Analysis of National Stock Exchange Indices (pdf), had me wondering if the NIFTY could indeed be modeled as an ARIMA(1,1,1) process as the author asserts. As a first step, I wanted to check if ARIMA(1,1,1) is a given. What would be best fit be &hellip; <\/p>\n","protected":false},"author":2,"featured_media":2066301,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471,9],"tags":[3391,2761],"class_list":["post-2066261","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","category-your-money","tag-nifty","tag-quant","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2066261","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=2066261"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2066261\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2066301"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=2066261"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=2066261"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=2066261"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}