Convert forecasted returns to prices

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Alvy
Posts: 2
Joined: Tue May 23, 2017 7:26 am

Convert forecasted returns to prices

Postby Alvy » Tue May 23, 2017 10:37 am

Hi!
So, I transformed my data series on prices into its continuously compounded returns and used it for model building and validation.
Now, I have the forecasted return values. How do I convert it back to prices?

Please help? Anyone?

Thank you!

startz
Non-normality and collinearity are NOT problems!
Posts: 3179
Joined: Wed Sep 17, 2008 2:25 pm

Re: Convert forecasted returns to prices

Postby startz » Tue May 23, 2017 11:05 am

Take the last price and multiply by 1 plus the return to get the next price.

Alvy
Posts: 2
Joined: Tue May 23, 2017 7:26 am

Re: Convert forecasted returns to prices

Postby Alvy » Tue May 23, 2017 8:30 pm

startz wrote:Take the last price and multiply by 1 plus the return to get the next price.


Hi! Thank you so much for the reply!
Can I ask for your help one more time?

Will you please take a look at the ACF plot of the continuously compounded return of my price series.
Does it show seasonality? do I have to use SARIMA instead of ARIMA?
Sorry. I have guesses. But I have significantly low knowledge in ARIMA modeling and such.
Hence, I really need to consult.

Your help is highly appreciated!
Attachments
Return_ACF.png
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startz
Non-normality and collinearity are NOT problems!
Posts: 3179
Joined: Wed Sep 17, 2008 2:25 pm

Re: Convert forecasted returns to prices

Postby startz » Tue May 23, 2017 8:57 pm

Perhaps just try a seasonal model and see what you get.


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