Measurement and prediction on periodicity of Shanghai Composite Index fluctuation

Abstract

Forecasting stock market index is significant for government macro-manipulation, investing risk aversion, and corporate operating profits. This paper applies three methods, which are linear trend method, H-P filtering method and Band2-Pass filtering method, to analyze periodicity and predictability of its fluctuation, and contrast predicted value with actual value, based on the data of Shanghai Composite Index from 2007-2009. We find that each of these three methods can give a prediction on the Shanghai Composite Index within a certain range. In terms of accuracy, H-P filtering method and Band2-Pass filtering method have a higher accuracy with a better scope of application and reveal the predictability of stock index.