Assessing the profitability of intraday opening range breakout strategies
AbstractIs it possible to beat the market by mechanical trading rules based on historical and publicly known information? Such rules have long been used by investors and in this paper, we test the success rate of trades and profitability of the Open Range Breakout (ORB) strategy. An investor that trades on the ORB strategy seeks to identify large intraday price movements and trades only when the price moves beyond some predetermined threshold. We present an ORB strategy based on normally distributed returns to identify such days and find that our ORB trading strategy result in significantly higher returns than zero as well as an increased success rate in relation to a fair game. The characteristics of such an approach over conventional statistical tests is that it involves the joint distribution of Low, High, Open and Close over a given time horizon.
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Bibliographic InfoPaper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 845.
Length: 11 pages
Date of creation: 23 Aug 2012
Date of revision:
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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
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Bootstrap; Crude oil futures; Contraction-Expansion principle; Efficient market hypothesis; Martingales; Technical Analysis;
Other versions of this item:
- Holmberg, Ulf & Lönnbark, Carl & Lundström, Christian, 2013. "Assessing the profitability of intraday opening range breakout strategies," Finance Research Letters, Elsevier, vol. 10(1), pages 27-33.
- C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-ENE-2012-09-03 (Energy Economics)
- NEP-MST-2012-09-03 (Market Microstructure)
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