A theoretical analysis of trading rules: an application to the moving average case with Markovian returns
A general framework for analysing trading rules is presented. We discuss different return concepts and different statistical processes for returns. We then concentrate on moving average trading rules and show, in the case of moving average models of length two, closed form expressions for the characteristic function of realized returns when the underlying return process follows a switching Markovian Gaussian process. An example is included which illustrates the technique.
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Volume (Year): 4 (1997)
Issue (Month): 3 ()
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- Blake LeBaron, "undated".
"Technical Trading Rules and Regime Shifts in Foreign Exchange,"
_007, University of Wisconsin - Madison.
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- Blake LeBaron, "undated". "Do Moving Average Trading Rule Results Imply Nonlinearities in Foreign Exchange?," Working papers _005, University of Wisconsin - Madison.
- Brock, William & Lakonishok, Josef & LeBaron, Blake, 1992. " Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance, American Finance Association, vol. 47(5), pages 1731-1764, December.
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