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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

  • DOI - Digital Object Identifier

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

  • Czech description

Classification

  • Type

    D - Article in proceedings

  • CEP classification

    IN - Informatics

  • OECD FORD branch

Result continuities

  • Project

  • 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

  • e-ISSN

  • 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