Robustness of mathematical models and technical analysis strategies
Portfolio Management
2016-05-03 v1 Mathematical Finance
Trading and Market Microstructure
Abstract
The aim of this paper is to compare the performances of the optimal strategy under parameters mis-specification and of a technical analysis trading strategy. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable Ornstein-Uhlenbeck process. For both strategies, we provide the asymptotic expectation of the logarithmic return as a function of the model parameters. Finally, numerical examples find that an investment strategy using the cross moving averages rule is more robust than the optimal strategy under parameters mis-specification.
Keywords
Cite
@article{arxiv.1605.00173,
title = {Robustness of mathematical models and technical analysis strategies},
author = {Ahmed Bel Hadj Ayed and Grégoire Loeper and Frédéric Abergel},
journal= {arXiv preprint arXiv:1605.00173},
year = {2016}
}