Forecasting the spot exchange rate of the Euro-dollar in the forex market using the comparison between the Holt method and artificial neural networks

Abstract

In this paper , the time series data of the daily exchange rate of the euro against the dollar were used for the period from (12/7/2020 H:1 AM-10/12/2020 H:7 AM) with a total of (79) Observations as (120) Observations for comparison with the forecast values obtained using the two methods, to make the comparison process for future forecasts for the period from (10/12/2020 H:8 AM- 15/12/2020 H:7 AM) with a total of (120) Observations. To predict them, between the double exponential smoothing model (Holt method) and the feed-forward artificial neural network model using the two algorithms (Incremental Back Propagation algorithm, Quick Propagation algorithm).These methods are characterized by high accuracy and flexibility of these methods in the process of analyzing the time series, the results of the application showed that the most efficient and optimal model for representing the time series data is the artificial neural network model [2-10-1] using the Quick Propagation algorithm for the daily exchange rate of the euro against the dollar according to the criterion The mean square error ( MSE), has given lower indicators than the indicators of the artificial neural network model [2-10-1] using the Incremental Back Propagation algorithm, and the double exponential smoothing model (Holt method) when using (α =0.9 and = 0.1), which clearly indicates that it is the appropriate and efficient model for estimating future forecasts for the period from (10/12/2020 H:8 AM- 15/12/2020 H:7 AM). Where these values showed consistency with their counterparts in the original series, and provided us with a future picture of the reality of the daily exchange rate of the euro against the dollar for that period. Therefore, the artificial neural network model provided better future predictions than those provided by the double exponential smoothing model (Holt method), according to the standard of mean square error ( MSE), it gave less indicators than the indicators of the Holt model. The ready-made statistical programs MinitabV18 were used in the statistical side, and the ready-made neural network system program known as Alyuda NeuroIntelligence was used in the neural networks side.