Using Macroeconomic Forecasts to Improve Mean Reverting Trading Strategies
Trading and Market Microstructure
2017-05-24 v1 Portfolio Management
Statistical Finance
Abstract
A large class of trading strategies focus on opportunities offered by the yield curve. In particular, a set of yield curve trading strategies are based on the view that the yield curve mean-reverts. Based on these strategies' positive performance, a multiple pairs trading strategy on major currency pairs was implemented. To improve the algorithm's performance, machine learning forecasts of a series of pertinent macroeconomic variables were factored in, by optimizing the weights of the trading signals. This resulted in a clear improvement in the APR over the evaluation period, demonstrating that macroeconomic indicators, not only technical indicators, should be considered in trading strategies.
Keywords
Cite
@article{arxiv.1705.08022,
title = {Using Macroeconomic Forecasts to Improve Mean Reverting Trading Strategies},
author = {Yash Sharma},
journal= {arXiv preprint arXiv:1705.08022},
year = {2017}
}