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Using Macroeconomic Forecasts to Improve Mean Reverting Trading Strategies

Yash Sharma

Papers from arXiv.org

Abstract: A large class of trading strategies focus on opportunities offered by the yield curve. In particular, a set of yield curve trading strategies are based on the view that the yield curve mean-reverts. Based on these strategies' positive performance, a multiple pairs trading strategy on major currency pairs was implemented. To improve the algorithm's performance, machine learning forecasts of a series of pertinent macroeconomic variables were factored in, by optimizing the weights of the trading signals. This resulted in a clear improvement in the APR over the evaluation period, demonstrating that macroeconomic indicators, not only technical indicators, should be considered in trading strategies.

New Economics Papers: this item is included in nep-cmp
Date: 2017-05
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