IDEAS home Printed from
   My bibliography  Save this article

Trading indicators with information-gap uncertainty


  • Colin J. Thompson
  • Anthony J. Guttmann
  • Ben J.P. Thompson


Purpose - This paper aims to provide a new quantitative methodology for predicting turning points and trends in financial markets time series based on information-gap decision theory. Design/methodology/approach - Uncertainty in future returns from financial markets is modeled using information-gap decision theory. The robustness function, which measures immunity to uncertainty, yields an additional time series whose turning points anticipate and reflect those of the underlying financial market time series. Findings - The robustness function falling above or below certain thresholds is shown to provide a new reliable technical indicator for predicting highs and lows in financial markets. In addition, iterates of the robustness function are shown in certain cases to predict trends in financial markets. Research limitations/implications - In the analysis and application presented here the authors have only considered a special case of the robustness function. Stricter performance requirements and alternative process model estimates for future returns could be included in the information-gap model formulation and analysis. Practical implications - An additional technical trading tool for applying Information-Gap theory to financial markets has been provided. Originality/value - This paper provides a new reliable methodology for constructing technical indicators for use by traders and fund managers in financial markets.

Suggested Citation

  • Colin J. Thompson & Anthony J. Guttmann & Ben J.P. Thompson, 2008. "Trading indicators with information-gap uncertainty," Journal of Risk Finance, Emerald Group Publishing, vol. 9(5), pages 467-476, November.
  • Handle: RePEc:eme:jrfpps:v:9:y:2008:i:5:p:467-476

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

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


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

    Cited by:

    1. Moshe Sniedovich, 2010. "A bird's view of info-gap decision theory," Journal of Risk Finance, Emerald Group Publishing, vol. 11(3), pages 268-283, May.


    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:eme:jrfpps:v:9:y:2008:i:5:p:467-476. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.