also Stop-loss rulesSystematic trading, 1, 374, 379, 380±6,387, 392T-statistic, 209, 218, 301±3, 321, 327Technical analysis, 125±30, 296±9, 392±5assessment of informative nature,63±104computing conditional returns,65±6conditioning on volume, 66data and sampling procedure, 65empirical results, 84±104goodness-to-®t tests, 63±4, 65,84±93summary statistics, 66±84automating, 52±62examples using identi®cationalgorithm, 57±62identi®cation algorithm, 55±62pattern de®nitions, 53±5de®nition, 419linguistic barriers, 42±3see also Performance, evaluation intechnical analysisTechnical indicators, 130±44as autoregressive models, 131Technical trading rules, 6±38, 300,345±64, 391and buy-and-hold strategy, 29±35, 37,345, 350±4correlations between, 175
Garch model, 8±9, 18±19, 23, 37genetically engineered, 345±6, 348,349±52linearity, 131±3, 134±5, 144±7random walk model, 8, 10±18, 300for S&P 500 futures, 345±64and statistical simulations, 8±38Tilting currency exposures, 185Trade eciency, de®nition, 421Trade Station, 423Traders:evaluation of, 367±75, 376, 378±9, 380limited liability, 316, 317, 318Trades, number of, de®nition, 422Trading horizon, 299±301, 373, 395±8Trading report performance summary,420Trading rule signals, 123±5, 152±71,345±6, 350, 357±64out-of-sample, 361and price patterns, 221±8, 345±6and rule returns, 124±5Trading rules, 2, 152±64, 296±303, 355±6endogenous and exogenous, 296±303and market ineciencies, 297mean-variance analysis, 112±20naive, 154±5, 159±64, 266and risk, 28±36, 355±6time horizons, 299±301see alsoFilter rulesHead-and-shoulders ruleMoving-average rulesTechnical trading rulesTrading style, 367±8, 373±5, 379, 380±6,387Trading system, de®nition, 439Transaction costs, 29, 117, 118, 301, 359,398Trend-following system, 395±8, 418Trends, de®nition, 422Triangle pattern, 54, 60Truncated bivariate distribution, 126,147
IndexUncovered interest parity, 22±3Variables, de®nition, 439Variance:active and passive portfolios, 178±9mean-variance analysis, 112±20minimum variance portfolio, 113±14,115±18, 120, 301
449
rule returns, 127, 129Volatility, 14±15, 36, 37, 117, 296, 312,356, 430White noise, 435de®nition, 423Wilcoxon test, 209, 218
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