Profitability of Trading in the Direction of Asset Price Jumps - Analysis of Multiple Assets and Frequencies
Profitability of Trading in the Direction of Asset Price Jumps - Analysis of Multiple Assets and Frequencies
Author(s): Milan FičuraSubject(s): Social Sciences, Economy
Published by: Vysoká škola ekonomická v Praze
Keywords: asset price jumps; L-estimator; high-frequency trading; momentum trading
Summary/Abstract: Profitability of a trading system based on the momentum-like effects of asset price jumps was tested on four currency markets (EUR/USD, GBP/USD, USD/CHF and USD/JPY) and three futures markets (Light Crude Oil, E-Mini S&P 500 and VIX), on 7 frequencies (1-minute to 1-day), over a period of more than 20 years. The proposed trading system entered long and short trades in the direction of asset price jumps and held the positions for a fixed horizon, optimized on the insample period. The system achieved statistically significant out-sample profits for the USD/CHF, EUR/USD and GBP/USD exchange rates, especially on the 15-minute, 30-minute and 1-hour frequencies, with expected returns of up to 20–30% p.a., including transaction costs. On the 1-day frequency, on the USD/JPY and on the three analysed futures markets, only insignificant profits or losses were achieved. On the 1-minute frequency, the system ended with a loss for all of the assets.
Journal: Prague Economic Papers
- Issue Year: 28/2019
- Issue No: 4
- Page Range: 385-401
- Page Count: 17
- Language: English