trading and investment - applied quantitative methods for

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1、1ApplicationsofAdvancedRegressionAnalysisforTradingandInvestment∗CHRISTIANL.DUNISANDMARKWILLIAMSABSTRACTThischapterexaminesandanalysestheuseofregressionmodelsintradingandinvestmentwithanapplicationtoforeignexchange(FX)forecastingandtradingmodels.Itisnotintendedasagenera

2、lsurveyofallpotentialapplicationsofregressionmethodstothefieldofquantitativetradingandinvestment,asthiswouldbewellbeyondthescopeofasinglechapter.Forinstance,time-varyingparametermodelsarenotcoveredhereastheyarethefocusofanotherchapterinthisbookandNeuralNetworkRegression(

3、NNR)modelsarealsocoveredinyetanotherchapter.Inthischapter,NNRmodelsarebenchmarkedagainstsomeothertraditionalregression-basedandalternativeforecastingtechniquestoascertaintheirpotentialaddedvalueasaforecastingandquantitativetradingtool.Inadditiontoevaluatingthevariousmod

4、elsusingtraditionalforecastingaccuracymeasures,suchasroot-mean-squarederrors,theyarealsoassessedusingfinancialcriteria,suchasrisk-adjustedmeasuresofreturn.HavingconstructedasyntheticEUR/USDseriesfortheperiodupto4January1999,themodelsweredevelopedusingthesamein-sampledata

5、,leavingtheremainderforout-of-sampleforecasting,October1994toMay2000,andMay2000toJuly2001,respectively.Theout-of-sampleperiodresultsweretestedintermsofforecastingaccuracy,andintermsoftradingperformanceviaasimulatedtradingstrategy.Transactioncostsarealsotakenintoaccount.

6、Itisconcludedthatregressionmodels,andinparticularNNRmodelsdohavetheabilitytoforecastEUR/USDreturnsfortheperiodinvestigated,andaddvalueasaforecastingandquantitativetradingtool.1.1INTRODUCTIONSincethebreakdownoftheBrettonWoodssystemoffixedexchangeratesin1971–1973andtheimpl

7、ementationofthefloatingexchangeratesystem,researchershavebeenmoti-vatedtoexplainthemovementsofexchangerates.TheglobalFXmarketismassivewith∗Theviewsexpressedhereinarethoseoftheauthors,andnotnecessarilythoseofGirobank.AppliedQuantitativeMethodsforTradingandInvestment.Edite

8、dbyC.L.Dunis,J.LawsandP.Na¨ım2003JohnWiley&Sons,LtdISBN:0-470-84885-52AppliedQuantitativeMethodsforTradingand