Big 5 ASEAN capital markets forecasting using WEMA method

Abstract

ASEAN through ASEAN Economics Community (AEC) 2020 treaty has proposed financial integration via capital markets integration in order to aim comprehensive ASEAN economic integration. Therefore, the need to have a proper prediction of ASEAN capital market becomes a major issue. In this study, we took big 5 ASEAN capital markets, i.e. Straits Times Index (STI), Kuala Lumpur Stock Exchange (KLSE), Stock Exchange of Thailand (SET), Jakarta Stock Exchange (JKSE), and Philippine Stock Exchange (PSE) to be forecasted using WEMA method. Weighted Exponential Moving Average (WEMA) is a new hybrid moving average method which combines the weighting factor calculation in Weighted Moving Average (WMA) with the procedure of Exponential Moving Average (EMA). WEMA has successfully been implemented and used to forecaste discrete time series data, but never being used to forecast ASEAN capital markets. In this study, we took further action by implementing the WEMA method with brute force approach for scaling factor tuning on big 5 ASEAN capital markets. From the experimental results, we found that WEMA has successfully forecasted all those exchanges. By looking at the forecast error measurement, it gives the best performance on PSE and worst performance on SET dataset among all datasets being considered in this study.