Optimal trading frequency for active asset management: Evidence from technical trading rules

Christian L Dunis () and Jia Miao
Additional contact information
Christian L Dunis: CIBEF – Center for International Banking, Economics and Finanace, JMU, John Foster Building

Journal of Asset Management, 2005, vol. 5, issue 5, No 3, 305-326

Abstract: Abstract The investment horizon or expected trading frequency is an important factor in investment decision making, but there is little literature in this field. The primary motivation for this paper is to find the optimal trading frequency for different assets in the context of active asset management by applying technical trading rules, the most widely used forecasting technique in financial markets. In addition to the simple moving average crossover system, two volatility filters are also applied, where a different trading strategy is proposed when market volatility is high. A model switch strategy is also introduced, where signals from different technical rules are adopted at different levels of market volatility. The results show that the addition of the two volatility filters and the introduction of a model switch strategy add value to the model's performance in terms of annualised return, Sharpe ratio and maximum drawdown. Significant improvement is found at both the single asset and portfolio levels. Although the results for the optimal trading frequencies differ for different assets, similar results have been achieved between the two stock indexes S&P500 and STOXX50 and between FX currency rates. In the case of stock indexes, the optimal trading frequency is about two to four trades per year, while for the FX currency rates, it is about ten to 20 trades per year.

Keywords: trading frequency; active asset management; technical rules; confirmation filter; volatility filter; switch strategy (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://link.springer.com/10.1057/palgrave.jam.2240149 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:assmgt:v:5:y:2005:i:5:d:10.1057_palgrave.jam.2240149

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41260

DOI: 10.1057/palgrave.jam.2240149

Access Statistics for this article

Journal of Asset Management is currently edited by Marielle de Jong and Dan diBartolomeo

More articles in Journal of Asset Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().