Time series analysis using wavelets and GJR-GARCH models

The aim of this paper is to provide an improved alternative to the classical econometric tools in the financial markets prediction. The idea of forecasting stock market future prices with wavelet analysis is the central element of this paper. Additionally to a wavelet analysis, an econometric model has been used in order to improve the performance of prediction. An algorithm which makes use of wavelets together with an econometric model is implemented in order to prove the advantages of wavelet analysis in financial forecasting. On the analyzed data we proved that our forecasting algorithm has achieved better results compared with the approach which is not using the wavelet transform.