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Using Macroeconomic Forecasts to Improve Mean Reverting Trading Strategies

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  • Yash Sharma

Abstract

A large class of trading strategies focus on opportunities offered by the yield curve. In particular, a set of yield curve trading strategies are based on the view that the yield curve mean-reverts. Based on these strategies' positive performance, a multiple pairs trading strategy on major currency pairs was implemented. To improve the algorithm's performance, machine learning forecasts of a series of pertinent macroeconomic variables were factored in, by optimizing the weights of the trading signals. This resulted in a clear improvement in the APR over the evaluation period, demonstrating that macroeconomic indicators, not only technical indicators, should be considered in trading strategies.

Suggested Citation

  • Yash Sharma, 2017. "Using Macroeconomic Forecasts to Improve Mean Reverting Trading Strategies," Papers 1705.08022, arXiv.org.
    • Handle: RePEc:arx:papers:1705.08022
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    References listed on IDEAS

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