Capabilities of Statistical Residual-Based Control Charts in Short- and Long-Term Stock Trading

Žmuk Berislav ()
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Žmuk Berislav: Faculty of Economics and Business, University of Zagreb, Croatia

Naše gospodarstvo/Our economy, 2016, vol. 62, issue 1, 12-26

Abstract: The aim of this paper is to introduce and develop additional statistical tools to support the decision-making process in stock trading. The prices of CROBEX10 index stocks on the Zagreb Stock Exchange were used in the paper. The conducted trading simulations, based on the residual-based control charts, led to an investor’s profit in 67.92% cases. In the short run, the residual-based cumulative sum (CUSUM) control chart led to the highest portfolio profits. In the long run, when average stock prices were used and 2-sigma control limits set, the residual-based exponential weighted moving average control chart had the highest portfolio profit. In all other cases in the long run, the CUSUM control chart appeared to be the best choice. The acknowledgment that the SPC methods can be successfully used in stock trading will, hopefully, increase their use in this field.

Keywords: Zagreb Stock Exchange; investments; statistical process control; autocorrelation; residual-based control charts (search for similar items in EconPapers)
JEL-codes: C22 C40 G11 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ngooec:v:62:y:2016:i:1:p:12-26:n:2

DOI: 10.1515/ngoe-2016-0002

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