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Are random trading strategies more successful than technical ones?

  • A. E. Biondo
  • A. Pluchino
  • A. Rapisarda
  • D. Helbing
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    In this paper we explore the specific role of randomness in financial markets, inspired by the beneficial role of noise in many physical systems and in previous applications to complex socio- economic systems. After a short introduction, we study the performance of some of the most used trading strategies in predicting the dynamics of financial markets for different international stock exchange indexes, with the goal of comparing them with the performance of a completely random strategy. In this respect, historical data for FTSE-UK, FTSE-MIB, DAX, and S&P500 indexes are taken into account for a period of about 15-20 years (since their creation until today).

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    File URL: http://arxiv.org/pdf/1303.4351
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    Paper provided by arXiv.org in its series Papers with number 1303.4351.

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    Date of creation: Mar 2013
    Date of revision: Jul 2013
    Publication status: Published in PLoS ONE 8(7): e68344 (2013)
    Handle: RePEc:arx:papers:1303.4351
    Contact details of provider: Web page: http://arxiv.org/

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    8. Carl Chiarella, 1992. "The Dynamics of Speculative Behaviour," Working Paper Series 13, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    9. repec:att:wimass:9530 is not listed on IDEAS
    10. J. Doyne Farmer & Paolo Patelli & Ilija I. Zovko, 2003. "The Predictive Power of Zero Intelligence in Financial Markets," Papers cond-mat/0309233, arXiv.org, revised Feb 2004.
    11. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
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    14. Giacomo Livan & Jun-ichi Inoue & Enrico Scalas, 2012. "On the non-stationarity of financial time series: impact on optimal portfolio selection," Papers 1205.0877, arXiv.org, revised Jul 2012.
    15. Pluchino, Alessandro & Rapisarda, Andrea & Garofalo, Cesare, 2010. "The Peter principle revisited: A computational study," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(3), pages 467-472.
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    18. Pluchino, Alessandro & Garofalo, Cesare & Rapisarda, Andrea & Spagano, Salvatore & Caserta, Maurizio, 2011. "Accidental politicians: How randomly selected legislators can improve parliament efficiency," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(21), pages 3944-3954.
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