Forecasting the general index values of the Iraq Stock Exchange ISX60 using the MARIMAX model

Abstract

The general market index is a mirror of the general economic situation of countries as it is a means of predicting the future economic situation. In this research, the weekly rates of the general index values of the Iraq Stock Exchange ISX60 were predicted using the MARIMAX model, with the effect of two variables, namely the weekly rates of the Iraqi dinar exchange rates and the weekly rates of Brent crude prices as external factors. A comparison was made between the models MARIMAX, ARIMA and ARIMAX, and the results of the comparison proved the superiority of the MARIMAX model (0,2,1) over the other two models. The results of the estimation of the cross-correlation coefficients of the time series indicated that there is a time displacement with a positive effect of seven weeks until the emergence of an effect of exchange rates, and a time displacement with a negative effect of ten weeks until an effect of oil prices. As for the results of forecasting using the MARIMAX model (0, 2, 1), it showed that there is a clear fluctuation in the future values of the index compared to what it was in the previous weeks, as the weekly averages of the index values will decrease oscillating during the next twenty weeks from the values recorded in the last week, then start to rise. Gradually and fluctuating as well, until it reaches the highest value at the thirty-eighth week.