Modelling the Behaviour of Currency Exchange Rates with Singular Spectrum Analysis and Artificial Neural Networks

Abstract

A proper understanding and analysis of suitable models involved in forecasting currency exchange rates dynamics is essential to provide reliable information about the economy. This paper deals with model fit and model forecasting of eight time series of historical data about currency exchange rate considering the United States dollar as reference. The time series techniques: classical autoregressive integrated moving average model, the non-parametric univariate and multivariate singular spectrum analysis (SSA), artificial neural network (ANN) algorithms, and a recent prominent hybrid method that combines SSA and ANN, are considered and their performance compared in terms of model fit and model forecasting. Moreover, specific methodological and computational adaptations were conducted to allow for these analyses and comparisons.

Keywords

• singular spectrum analysis
• multivariate singular spectrum analysis
• time series forecasting
• artificial neural networks
• currency exchange rates