Finance

Trading Systems

NB This page is a review of trading systems in general, not my own work.

Preprocessing

Theodoridis and Koutroumbas (2003) (second edition), pages 164-166 Theodoridis and Koutroumbas (2006) (third edition), pages 214-216 *outlier removal *data normalization *missing data Pyle (1999) Data Preparation for Data Mining Masters (1995), pages 1-41

Books

Mailing List

  • CONRAD, Jennifer and Gautam KAUL, 1998. An anatomy of trading strategies, The Review of Financial Studies, Vol. 11, No. 3. (Autumn, 1998), pp. 489-519. [Cited by 165] (20.62/year)
    • Abstract: "In this article we use a single unifying framework to analyze the sources of profits to a wide spectrum of return-based trading strategies implemented in the literature. We show that less than 50% of the 120 strategies implemented in the article yield statistically significant profits and, unconditionally, momentum and contrarian strategies are equally likely to be successful. However, when we condition on the return horizon (short, medium, or long) of the strategy, or the time period during which it is implemented, two patterns emerge. A momentum strategy is usually profitable at the medium (3- to 12-month) horizon, while a contrarian strategy nets statistically significant profits at long horizons, but only during the 1926-1947 subperiod. More importantly, our results show that the cross-sectional variation in the mean returns of individual securities included in these strategies plays an important role in their profitability. The cross-sectional variation can potentially account for the profitability of momentum strategies and it is also responsible for attenuating the profits from price reversals to long-horizon contrarian strategies." \citeasnoun{ConradKaul98} implemented and analyzed a wide spectrum of trading strategies during the 1926--1989 period, and during subperiods within, using the entire sample of available NYSE/AMEX securities. They found that a momentum strategy is usually profitable at the medium (3- to 12-month) horizon, while a contrarian strategy nets statistically significant profits at long horizons, but only during the 1926--1947 subperiod.

    Bibliography