Time, Dynamics, and Uncertainty Notes and code only.

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Presentation transcript:

Time, Dynamics, and Uncertainty Notes and code only

Examples Multiperiod investment problems –Done Trading strategies Retirement

Dynamic Strategies Adjusting trading positions over time Examples –Market timing –Technical trading –Momentum

Trend Following Strategies Buy (long) when P(t)>MA(t) –MA(t) = moving average of past P’s Sell (short) otherwise Methods for testing –Statistical –Bootstrap

Simple Bootstrap Tests Random walk null hypothesis Moving average rule Single rule –No snooping correction trule1.m New data: (next slide)

jyfxbis.dat –Date –Matlab date –$/Yen –Yen interest rate –$ interest rate

Wild Bootstrap Problem with random walk bootstrap –Volatility Allow persistent volatility, but destroy predictable components trule2.m

Data Snooping Adjustments Researcher has reported best result for many strategies Search over many strategies on the random walk and record distribution of “best” strategy Compare to actual “best” trule3.m

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