STOCHASTIC MODEL OF SHORT-TIME PRICE DEVELOPMENT OF SHARES AND ITS PROFITABILITY IN ALGORITHMIC TRADING
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F49777513%3A23510%2F16%3A43928785" target="_blank" >RIV/49777513:23510/16:43928785 - isvavai.cz</a>
Result on the web
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DOI - Digital Object Identifier
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Alternative languages
Result language
angličtina
Original language name
STOCHASTIC MODEL OF SHORT-TIME PRICE DEVELOPMENT OF SHARES AND ITS PROFITABILITY IN ALGORITHMIC TRADING
Original language description
The aim of this study is to verify the profitability of speculative algorithmic trading systems. The study was performed on historical daily prices (open and close) of the CEZ shares in a ten years period from the beginning of 2006 to the end of 2015. The profitability of algorithmic trading systems is compared to the passive 'Buy and Hold' strategy. In the study we present three trading systems, the basic one and two its modifications. The systems use business strategies based on assumptions of Technical Analysis (TA). TA assumes that stock prices move in three types of trends: primary, secondary and minor. The subject of our interest is the minor trend which usually lasts for several days. During the duration of this trend the share price accumulates a gain or loss in relation to the price at the beginning of the trend. We further assume that the probability of reversing this trend increases with accumulated loss or gain. For modelling the probability of trend reversal, we use the theory of Markov chains. States in which there is a high probability of a change in the trend are suitable for generating trading orders. The results of this study show that algorithmic trading systems employing this strategy are able to outperform the market.
Czech name
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Czech description
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Classification
Type
D - Article in proceedings
CEP classification
IN - Informatics
OECD FORD branch
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Result continuities
Project
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Continuities
S - Specificky vyzkum na vysokych skolach
Others
Publication year
2016
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Article name in the collection
Quantitative Methods in Economics / Multiple Criteria Decision Making XVIII
ISBN
978-80-972328-0-1
ISSN
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e-ISSN
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Number of pages
7
Pages from-to
362-368
Publisher name
Letra Interactive, s.r.o.
Place of publication
Bratislava
Event location
Vrátna, Slovakia
Event date
May 25, 2016
Type of event by nationality
EUR - Evropská akce
UT code for WoS article
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