IDEAS home Printed from https://ideas.repec.org/a/pal/assmgt/v5y2005i5d10.1057_palgrave.jam.2240149.html
   My bibliography  Save this article

Optimal trading frequency for active asset management: Evidence from technical trading rules

Author

Listed:
  • Christian L Dunis

    (CIBEF – Center for International Banking, Economics and Finanace, JMU, John Foster Building)

  • Jia Miao

Abstract

The investment horizon or expected trading frequency is an important factor in investment decision making, but there is little literature in this field. The primary motivation for this paper is to find the optimal trading frequency for different assets in the context of active asset management by applying technical trading rules, the most widely used forecasting technique in financial markets. In addition to the simple moving average crossover system, two volatility filters are also applied, where a different trading strategy is proposed when market volatility is high. A model switch strategy is also introduced, where signals from different technical rules are adopted at different levels of market volatility. The results show that the addition of the two volatility filters and the introduction of a model switch strategy add value to the model's performance in terms of annualised return, Sharpe ratio and maximum drawdown. Significant improvement is found at both the single asset and portfolio levels. Although the results for the optimal trading frequencies differ for different assets, similar results have been achieved between the two stock indexes S&P500 and STOXX50 and between FX currency rates. In the case of stock indexes, the optimal trading frequency is about two to four trades per year, while for the FX currency rates, it is about ten to 20 trades per year.

Suggested Citation

  • Christian L Dunis & Jia Miao, 2005. "Optimal trading frequency for active asset management: Evidence from technical trading rules," Journal of Asset Management, Palgrave Macmillan, vol. 5(5), pages 305-326, February.
    • Handle: RePEc:pal:assmgt:v:5:y:2005:i:5:d:10.1057_palgrave.jam.2240149
    DOI: 10.1057/palgrave.jam.2240149
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/palgrave.jam.2240149
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/palgrave.jam.2240149?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cristiana Tudor, 2023. "Enhancing Sustainable Finance through Green Hydrogen Equity Investments: A Multifaceted Risk-Return Analysis," Risks, MDPI, vol. 11(12), pages 1-22, December.
    2. Sermpinis, Georgios & Theofilatos, Konstantinos & Karathanasopoulos, Andreas & Georgopoulos, Efstratios F. & Dunis, Christian, 2013. "Forecasting foreign exchange rates with adaptive neural networks using radial-basis functions and Particle Swarm Optimization," European Journal of Operational Research, Elsevier, vol. 225(3), pages 528-540.
    3. Manolis Kavussanos & Ilias Visvikis, 2008. "Hedging effectiveness of the Athens stock index futures contracts," The European Journal of Finance, Taylor & Francis Journals, vol. 14(3), pages 243-270.
    4. Christian Dunis & Jia Miao, 2007. "Trading foreign exchange portfolios with volatility filters: the carry model revisited," Applied Financial Economics, Taylor & Francis Journals, vol. 17(3), pages 249-255.
    5. Wang, Wei & Lan, Yingjie, 2022. "Robust one-way trading with limited number of transactions and heuristics for fixed transaction costs," International Journal of Production Economics, Elsevier, vol. 247(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:assmgt:v:5:y:2005:i:5:d:10.1057_palgrave.jam.2240149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.