Market direction is very important for investors or traders. Predicting market direction is quite a challenging task as market data involves lots of noise. The market moves either upward or downward and the nature of market movement is binary. A logistic regression model help us to fit a model using binary behavior and forecast market direction. Logistic regression is one of the probabilistic models which assigns probability to each event. I am assuming you are well versed with extracting data from Yahoo as you have studied this in previous chapters. Here again, I am going to use the quantmod package. The next three commands are used for loading the package into the workspace, importing data into R from the yahoo repository and extracting only the closing price from the data:
>library("quantmod") >getSymbols("^DJI",src="yahoo") >dji<- DJI[,"DJI.Close"]
The input data to the logistic regression is constructed using different indicators, such...
