Trading system evaluation based on past performance: Random Signals Test

Alex Strashny

Finance from EconWPA

Abstract: This paper introduces a new method for evaluating a trading system based on its past performance. The method is a hypothesis test that asks whether the system is making random trades. The test controls for price behavior during the test period and the trade characteristics of the system being tested. A system should be traded only if the null hypothesis of random trading is rejected.

Keywords: system evaluation; hypothesis testing; trading (search for similar items in EconPapers)
JEL-codes: G1 C12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-fmk
Date: 2002-05-24, Revised 2002-06-10
Note: Type of Document - pdf; prepared on PC / Word; to print on any; pages: 13; figures: included. 2 figures.

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http://129.3.20.41/eps/fin/papers/0205/0205003.pdf (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0205003

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