Application and further development of statistical trading rules with particular reference to the Johannesburg Stock Exchange

Abstract :

Attempts to derive a mechanical trading rule which could be applied on an operational basis to the ordinary shares of companies listed on the Johannesburg Stock Exchange. The major objective of the trading rule is to outperform the returns which could be achieved by a buy and hold strategy with the same shares over the same time period, taking into account the brokerage and taxation requirements of both methods of investment. The study deals with methods for detecting variance shifts in the log price relatives. Using an F-test programme to segment the data, the research detects a relationship between various parameters of the segments. Exception, a trading rule based on the relationship between segment variances and means was formed and the theoretical net profit deduced. It was found that these profits generally underperformed the return which could have been achieved by a buy and hold strategy. The reason for this poor performance was shown to be due to the lag inherent in the trading rule. As a result of this finding, an attempt to use the cusum technique as a signal generator was made, but it too generally underperformed the return which could have been achieved by a buy and hold strategy. On the basis of these findings, it is concluded that the cusum technique is not viable as a method of generating profits which would outperform a buy and hold strategy over the same period. The requirements are outlined for a modified objective, for which it seems that the cusum would be more suitable.

 

Details

Author Nakan SB
URL http://hdl.handle.net/20.500.11892/123807
Date Accessioned 2016-09-22T11:28:03Z
Date Available 2016-09-22T11:28:03Z
Date Created 1978
Identifier URL 1979
Language English
Subject Business administration / Business leadership
Subject 2 Business administration / Business leadership
Alternative Title
Degree Type Masters degree
Degree Description  MBA