Sunday, June 14, 2015

2015.06.12 DJIA Cycle Model Chart

2015.06.12 DJIA Cycle Model Chart

















At the risk of another modeling disaster, here is the "new and improved" DJIA model. Readers will recall the agonizing demise of the last DJIA cycle model.  I added cyclical frequency modulation to the usual amplitude modulation and the model backtested quite well, predicting the last close of the DJIA within 200 points from data ending 31DEC2014. Take it with copious salt and spices, and remember that all models are wrong but some are useful. On the plus side, the model goes back to 1896, so there are strong secular and multidecadal business cycles in play. On the other hand, there are shorter cycles that now have more error, which I am attributing to liquidity factors in the past 10 years that are new to the structure.

2 comments:

rotrot said...

nice work!

Paolo said...

Thanks rotrot. I also appreciate your sharing various informational tidbits!