Forecasting of the Philippine stock exchange composite index

Abstract

This study explores forecasting the Philippine Stock Exchange Composite Index (PSEi) for 2024-2026 using the ARIMA (Autoregressive Integrated Moving Average) model. Leveraging historical data from February 01, 2010 to December 31, 2023, the research scrutinizes various ARIMA models, revealing challenges in stability and diagnostic concerns. The results highlight ARIMA Model 7 (2,1,2) as the most robust, demonstrating strong explanatory power and stable dynamics. The forecasted values align with historical trends but exhibit uncertainties, as seen in a wide 95 percent interval. While the ARIMA model performs satisfactorily, acknowledging its limitations, the study recommends exploring model combinations and integrating advanced machine learning methods for enhanced accuracy. Additionally, incorporating three efficient market hypothesis is essential for formulating investment strategies. The research contributes insights to stock market forecasting in emerging markets like the Philippines.