An application of CUSUM chart on financial trading

Ling XIN, Leung Ho Philip YU, Kin LAM

Research output: Chapter in Book/Report/Conference proceedingChapters

4 Citations (Scopus)

Abstract

The applications of CUSUM quality control chart to financial markets is not new in literature. It has been shown that the filter trading rule is mathematically equivalent to the CUSUM quality control test as both are based on change point detection theory. Filter trading rule has been extensively studied in the field of testing the financial market efficiency. In this paper, we studied the filter trading rule under a model assumption of Markov switching model (MSM) which has become very popular in financial applications. From our studies, it is found that the filter trading rule may beat the buy-and-hold strategy when the two-regime MSM fit the asset returns well. Copyright © 2013 IEEE.
Original languageEnglish
Title of host publicationProceedings of 2013 Ninth International Conference on Computational Intelligence and Security
Place of PublicationDanvers, MA
PublisherIEEE
Pages178-181
ISBN (Print)9781479925483
DOIs
Publication statusPublished - 2013

Citation

Xin, L., Yu, P. L. H., & Lam, K. (2013). An application of CUSUM chart on financial trading. In Proceedings of 2013 Ninth International Conference on Computational Intelligence and Security (pp. 178-181). Danvers, MA: IEEE.

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