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Positive Expected Feedback Trading Gain for all Essentially Linearly Representable Prices

Title data

Baumann, Michael Heinrich ; Grüne, Lars:
Positive Expected Feedback Trading Gain for all Essentially Linearly Representable Prices.
In: 2019 12th Asian Control Conference (ASCC). - Piscataway, NJ : IEEE , 2019 . - pp. 150-155
ISBN 978-1-7281-0263-4

Official URL: Volltext

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Project financing: Bundesministerium für Bildung und Forschung
Hanns-Seidel-Stiftung

Abstract in another language

We study a specific feedback stock trading rule, the simultaneously long short (SLS) strategy. This strategy is known to yield positive expected gains when the underlying stock returns are governed by a geometric Brownian motion or by Merton’s jump diffusion model. In this paper, we generalize these results to a set of price models called essentially linearly representable prices that are given by means of a set of stochastic differential equations based on (semi)martingales. Particularly, we show that the SLS trader’s expected gain is almost always positive and that it does not depend on the chosen price model but only on the trend. The basic novelties of this work are, first, the extension of the results in the literature to a set of SDEs and, second, that we do not need a solution of the SDEs, but we work on the level of SDEs directly, i.e., also for SDEs without or with unknown closed-form solutions positive SLS trading gains can be proven.

Further data

Item Type: Article in a book
Refereed: Yes
Keywords: Market research; Investment; Mathematical model; Economic indicators; Silicon; Closed-form solutions; Stochastic processes; Brownian motion; differential equations; feedback; pricing; share prices; stochastic processes; stock markets;
SDEs; essentially linearly representable prices; specific feedback stock trading rule; geometric Brownian motion; price models; stochastic differential equations; SLS trader; stock returns; jump diffusion model; positive expected feedback trading gain; simultaneously long short strategy; closed-form solution positive SLS trading gains; semimartingales
Institutions of the University: Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics > Chair Mathematics V (Applied Mathematics)
Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics > Chair Mathematics V (Applied Mathematics) > Chair Mathematics V (Applied Mathematics) - Univ.-Prof. Dr. Lars Grüne)
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Profile Fields > Advanced Fields > Nonlinear Dynamics
Research Institutions > Research Centres > Forschungszentrum für Modellbildung und Simulation (MODUS)
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
500 Science > 510 Mathematics
Date Deposited: 17 Oct 2019 09:14
Last Modified: 17 Oct 2019 09:14
URI: https://eref.uni-bayreuth.de/id/eprint/52775