THE APPROACH OF BOX JENKINS TIME SERIES ANALYSIS FOR PREDICTING STOCK PRICE ON LQ45 STOCK INDEX

Abstract

The accuracy of stock price prediction is an important aspect for investor in order to gain maximum returns. Technical analysis is one of stock analysis which argue that future stock prices are formed by price movements and the stock price pattern itself. One of modelling techniques in technical analysis that widely used is Box Jenkins Model or technically named as Autoregressive Integrated Moving Average (ARIMA). This research aims to predicting stock index through ARIMA.  Having high liquidity and known as blue chip index in Indonesia, LQ45 will be used as data samples, that is daily stock index in period of Januari 2016 to November 2018. Data analysis started by running stationarity test, followed by determination of ARIMA model and paired sample t-test to measure the model’s effectivity. The research result shows that the data stationary after first differencing, and the best model is ARIMA (2,1,1). Model having fairly high R-squared and minimum RMSE namely 98.3% and 9.946 resepctively. This model then used to predict future stock index in the next 15 days. Furthermore, paired t-test was run and shows that there is no significance differences between actual and predicted values, indicated that ARIMA model successfully forecast LQ45 stock index.