Application of a Nonlinear Model in Predictions of Returns on Investment

    Kyu-Bark Shim
    Keywords: Asset, growth curve model, mean-shift model, nonlinear model, outliers, investment portfolio ,


    The uncertainty in worldwide stock markets has been growing since the emergence of Covid-19. Returns
    on investment are difficult to predict due to this market uncertainty, and we can see that it is a nonlinear
    model compared to past trends. Therefore, it is necessary to create a model that can reflect correct
    trends. If the model is nonlinear, it is correct to reflect the appropriate weighting value. If using data
    containing outliers, estimating a nonlinear model is very complicated and difficult, compared to
    estimating a linear model. In this study, we introduce a detection method that uses a mean-shift model
    for growth portfolios that include outliers in nonlinear models.

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