High frequency exchange rate prediction with an artificial neural network

Choudhry, Taufiq, McGroarty, Frank, Peng, Ke and Wang, Shiyun (2012) High frequency exchange rate prediction with an artificial neural network. Intelligent Systems in Accounting Finance & Management, 19, (3), 170-178.


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This paper examines how market microstructure variables can be used to forecast foreign exchange rates at frequencies of one to several minutes. We use a unique foreign exchange (FX) dataset of global inter-dealer electronic transactions and applied the Artificial Neural Network (ANN) as the predicting model. The immediately preceding bid and ask prices are significant factors in these predictions, which is in keeping with market microstructure theory. These microstructure factors have not been tested in ANN model before. High frequency trading strategies based on ANN model are shown to be profitable even when transaction costs are included.

Item Type: Article
ISSNs: 1055-615X (print)
1099-1174 (electronic)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HG Finance
Divisions : Faculty of Business and Law > Southampton Business School > Centre for Digital, Interactive & Data Driven Marketing
ePrint ID: 340754
Accepted Date and Publication Date:
1 July 2012Published
Date Deposited: 02 Jul 2012 13:28
Last Modified: 31 Mar 2016 14:30
URI: http://eprints.soton.ac.uk/id/eprint/340754

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