Time Series Analysis Indicators under Directional Changes: The Case of Saudi Stock Market

Year 2016, Volume: 6 Issue: 1, 55 - 64, 01.03.2016

Monira Essa Aloud

Abstract

We introduce a set of time series analysis indicators under an event based framework of directional changes (DC) and overshoots. Our aim
is to map continuous financial market price data into the so-called DC Framework - A state based discretization of basically dissected price
time series. The DC framework analysis relied on understanding the price time series as an event-based process, as an alternative of focusing
on their stochastic character. Defining a scheme for state reduction of DC Framework, we show that it has a dependable hierarchical structure
that permits for analysis of financial data. We show empirical examples within the Saudi Stock Market. The new DC indicators represent the
foundation of a completely new generation of financial tools for studying volatility, risk measurement, and building advanced forecasting and
automated trading models.

Keywords

Directional Changes , Financial Forecasting , Automated Trading , Financial Markets , Saudi Stock Market