๐”– Bobbio Scriptorium
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Forecasting and trading strategies based on a price trend model

โœ Scribed by Josephine W. C. Kwan; K. Lam; Mike K. P. So; Philip L. H. Yu

Publisher
John Wiley and Sons
Year
2000
Tongue
English
Weight
164 KB
Volume
19
Category
Article
ISSN
0277-6693

No coin nor oath required. For personal study only.

โœฆ Synopsis

In this paper, we consider the price trend model in which it is assumed that the time series of a security's prices contain a stochastic trend component which remains constant on each of a sequence of time intervals, with each interval having random duration. A quasi-maximum likelihood method is used to estimate the model parameters. Optimal one-step-ahead forecasts of returns are derived. The trading rule based on these forecasts is constructed and is found to bear similarity to a popular trading rule based on moving averages. When applying the methods to forecast the returns of the Hang Seng Index Futures in Hong Kong, we ยฎnd that the performance of the newly developed trading rule is satisfactory.

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