Forecasting probability

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Forecasting probability

Postby BTB » Thu Nov 01, 2018 10:44 am

Hi all, I am facing a problem with forecasting probability.

I need to forecast the probability of a crash within the next 24 months in the financial markets with regard to historical 24 months returns and its 95% confidence interval.

I have a database which looks like:

historical returns crash yes or no
from small to large 1 = crash, 0 = no crash
only positive returns
largest value ~ 130%

I estimate an equation which looks like "crash y 24mreturn" and use probit method.
When I click on forecasting then, the graph uses the number of observation on the x axis instead of the return and the values of the x axis don´t exceed the largest value (130% return => crash probability ~75%). However I would need values on the x axis going until 200%.

The next thing is that I can´t add a confidence interval as I can´t touch the field where I would need to type the numbers in.

Please find the graph which I will replicate with my data attached!

I would be very grateful for any support.

Thanks in advance.

Forecasting.JPG (17.89 KiB) Viewed 1081 times

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