Optimal trading frequency for active asset management: Evidence from technical trading rules

Authors: Dunis, Christian L1; Miao, Jia

Source: Journal of Asset Management, Volume 5, Number 5, 1 February 2005 , pp. 305-326(22)

Publisher: Palgrave Macmillan

Key:
Free Content - Free Content
New Content - New Content
Subscribed Content - Subscribed Content
Free Trial Content - Free Trial Content

Abstract:

The investment horizon or expected trading frequency is an important factor in investment decision making, but there is little literature in this field. The primary motivation for this paper is to find the optimal trading frequency for different assets in the context of active asset management by applying technical trading rules, the most widely used forecasting technique in financial markets. In addition to the simple moving average crossover system, two volatility filters are also applied, where a different trading strategy is proposed when market volatility is high. A model switch strategy is also introduced, where signals from different technical rules are adopted at different levels of market volatility. The results show that the addition of the two volatility filters and the introduction of a model switch strategy add value to the model's performance in terms of annualised return, Sharpe ratio and maximum drawdown. Significant improvement is found at both the single asset and portfolio levels. Although the results for the optimal trading frequencies differ for different assets, similar results have been achieved between the two stock indexes S&P500 and STOXX50 and between FX currency rates. In the case of stock indexes, the optimal trading frequency is about two to four trades per year, while for the FX currency rates, it is about ten to 20 trades per year.Journal of Asset Management (2005) 5, 305-326; doi:10.1057/palgrave.jam.2240149

Document Type: Research article

DOI: 10.1057/palgrave.jam.2240149

Affiliations: 1: 1CIBEF - Center for International Banking, Economics and Finanace, JMU, John Foster Building, 98 Mount Pleasant, Liverpool L3 5UZ, UK, Email: cdunis@totalise.co.uk

* This feature is in beta and some links may initially be displayed as numbers instead of article titles. Clicking on any of the links will take you to the recommended articles, regardless of the display of the link.

The full text article is available for purchase

$40.00 plus tax

 

OR

Back to top

Key:
Free Content - Free Content
New Content - New Content
Subscribed Content - Subscribed Content
Free Trial Content - Free Trial Content
Page Help Click here for Page Help
Shopping cart
Tools
Sign in






Need to register?
Sign up here
Text size: A | A | A | A