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