Predicative Ability of Similarity-based Futures Trading Strategies

Hsin-Yu Chiu, Mi-Hsiu Chiang and Wei-Yu Kuo

No 2018-045, IRTG 1792 Discussion Papers from Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series"

Abstract: A trading rule that draws on the empirical similarity concept is proposed to simulate the technical trading mentality|one that selectively perceives structural resemblances between market scenarios of the present and the past. In more than half of the nineteen futures markets that we test against for protability of this similarity-based trading rule, we nd evidence of predictive ability that is robust to data-snooping and transaction-cost adjust- ments. When aided by an exit strategy that liquidates the trader's positions across some evenly-spaced time points, this rule generates the most robust returns.

Keywords: empirical similarity; technical trading; futures markets; analogical reasoning (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:irtgdp:2018045

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