Algorithmic Trading Using Markov Chains: Comparing Empirical and Theoretical Yields

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F49777513%3A23510%2F16%3A43929998" target="_blank" >RIV/49777513:23510/16:43929998 - isvavai.cz</a>

Výsledek na webu

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DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

Algorithmic Trading Using Markov Chains: Comparing Empirical and Theoretical Yields

Popis výsledku v původním jazyce

This study is focused on comparing empirical and theoretical yield of business strategies applied to stock markets. We continue in our previous articles in which we deal with the short-term prediction of stock markets and with creating business strategies using Markov Chains analysis. When defining a state space we assume that the stock price moves in three types of trends: primary, secondary and minor. The object of our interest is a minor trend which usually lasts for several days. During this trend the stock price accumulates a certain profit or loss in relation to the price at the beginning of the trend. The state space is defined by the size of the accumulated profit or loss. Business strategies are formed in the way that the states in which the stock price decreases generate buying signals and the states in which the stock price increases generate selling signals. Theoretical profitability of a business strategy is modeled on the basis of a matrix of transition between states probability, a matrix of evaluation of these transitions and the expected number of transactions. We calculate the parameters of this model, as well as empirical profitability, with historical data of CEZ stock during the ten years period from early 2006 to the end of 2015. In some cases empirical and theoretical results were nearly the same, in other cases they differed significantly.

Název v anglickém jazyce

Algorithmic Trading Using Markov Chains: Comparing Empirical and Theoretical Yields

Popis výsledku anglicky

This study is focused on comparing empirical and theoretical yield of business strategies applied to stock markets. We continue in our previous articles in which we deal with the short-term prediction of stock markets and with creating business strategies using Markov Chains analysis. When defining a state space we assume that the stock price moves in three types of trends: primary, secondary and minor. The object of our interest is a minor trend which usually lasts for several days. During this trend the stock price accumulates a certain profit or loss in relation to the price at the beginning of the trend. The state space is defined by the size of the accumulated profit or loss. Business strategies are formed in the way that the states in which the stock price decreases generate buying signals and the states in which the stock price increases generate selling signals. Theoretical profitability of a business strategy is modeled on the basis of a matrix of transition between states probability, a matrix of evaluation of these transitions and the expected number of transactions. We calculate the parameters of this model, as well as empirical profitability, with historical data of CEZ stock during the ten years period from early 2006 to the end of 2015. In some cases empirical and theoretical results were nearly the same, in other cases they differed significantly.

Druh

D - Stať ve sborníku

CEP obor

IN - Informatika

OECD FORD obor

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Projekt

<a href="/cs/project/GA15-20405S" target="_blank" >GA15-20405S: Modelování procesů na finančních trzích a predikce bankrotu firem aparátem reálných opcí</a><br>

Návaznosti

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Rok uplatnění

2016

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název statě ve sborníku

EUROPEAN FINANCIAL SYSTEM 2016: PROCEEDINGS OF THE 13TH INTERNATIONAL SCIENTIFIC CONFERENCE

ISBN

978-80-210-8308-0

ISSN

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e-ISSN

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Počet stran výsledku

7

Strana od-do

787-793

Název nakladatele

Masaryk University

Místo vydání

Brno

Místo konání akce

Brno

Datum konání akce

27. 6. 2016

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

000385692200104