Stochastic technical analysis for decision making on the financial market

Markus Höchstötter and Mher Safarian

No 62, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: We apply the well-known CUSUM and the Girshick-Rubin algorithm as trading strategies involving only mutually exclusive long positions in cash and the DAX at Frankfurt mid-day auction prices. We select optimal pairs of fixed thresholds for up- and down-movements from a pre-defined two-dimensional grid, hence, admitting asymmetric intervals. We show that under three different scenarios for transaction costs, the CUSUM technique not only outperforms the passive investment in the DAX but also the alternative Girshick-Rubin algorithm.

Keywords: CUSUM; Girshick-Rubin; trading algorithm; DAX (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitwps:62

DOI: 10.5445/IR/1000043466

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