Seminar by Prof. Bob Barmish, University of Wisconsin-Madison
Event details
| Date | 22.03.2017 |
| Hour | 12:00 › 14:00 |
| Speaker | Prof. Bob Barmish, University of Wisconsin-Madison |
| Location | |
| Category | Conferences - Seminars |
"A New Theory of Stock Trading Based on Robust Control Concepts"
Abstract
The motivation for this research is derived from the voluminous literature studying the profitability of technically-based stock-trading strategies. Suffice it to say, the literature is controversial. Some authors claim their empirical studies using historical data demonstrate efficacy of technical analysis while others claim that such studies are flawed; e.g., factors such as problems in testing procedures and data snooping lead to unduly optimistic results. With these considerations in mind, in this talk, I will provide an overview of a new paradigm for stock trading inspired by robust control theory. In contrast to the existing literature, the argument for efficacy of technical analysis will be based on theory rather than back-testing using historical data. To this end, we will consider a pyramid-style trend-following trade management rule which we call ``Simultaneous Long-Short.'' In an idealized market characterized by perfect liquidity, zero transaction costs and other classical assumptions, we describe a number of theoretically provable robustness properties of the trading system. One of the main takeaways from this talk should be that success of some technically-based trading systems are more rooted in sound money management than predictions about future prices.
Abstract
The motivation for this research is derived from the voluminous literature studying the profitability of technically-based stock-trading strategies. Suffice it to say, the literature is controversial. Some authors claim their empirical studies using historical data demonstrate efficacy of technical analysis while others claim that such studies are flawed; e.g., factors such as problems in testing procedures and data snooping lead to unduly optimistic results. With these considerations in mind, in this talk, I will provide an overview of a new paradigm for stock trading inspired by robust control theory. In contrast to the existing literature, the argument for efficacy of technical analysis will be based on theory rather than back-testing using historical data. To this end, we will consider a pyramid-style trend-following trade management rule which we call ``Simultaneous Long-Short.'' In an idealized market characterized by perfect liquidity, zero transaction costs and other classical assumptions, we describe a number of theoretically provable robustness properties of the trading system. One of the main takeaways from this talk should be that success of some technically-based trading systems are more rooted in sound money management than predictions about future prices.
Practical information
- General public
- Free