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Robustness of mathematical models and technical analysis strategies

Ahmed Bel Hadj Ayed, Gr\'egoire Loeper and Fr\'ed\'eric Abergel

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Abstract: The aim of this paper is to compare the performances of the optimal strategy under parameters mis-specification and of a technical analysis trading strategy. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable Ornstein-Uhlenbeck process. For both strategies, we provide the asymptotic expectation of the logarithmic return as a function of the model parameters. Finally, numerical examples find that an investment strategy using the cross moving averages rule is more robust than the optimal strategy under parameters mis-specification.

Date: 2016-04
New Economics Papers: this item is included in nep-cmp
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