Scandinavian Working Papers in Economics
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Statistical Research Unit, Department of Economics, School of Business, Economics and Law, University of Gothenburg Resarch Reports

No 2007:8:
Similarities and differences between statistical surveillance and certain decision rules in finance

David Bock (), Eva Andersson () and Marianne Frisén ()

Abstract: Financial trading rules have the aim of continuously evaluating available information in order to make timely decisions. This is also the aim of methods for statistical surveillance. Many results are available regarding the properties of surveillance methods. We give a review of financial trading rules and use the theory of statistical surveillance to find properties of some commonly used trading rules. In addition, a nonparametric and robust surveillance method is proposed as a trading rule. Evaluation measures used in statistical surveillance are compared with those used in finance. The Hang Seng Index is used for illustration.

Keywords: Trading rules; Hidden Markov model; Filter rule; Moving average; Statistical surveillance; (follow links to similar papers)

JEL-Codes: C10; (follow links to similar papers)

30 pages, December 13, 2007

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This paper is published as:
Bock, David, Eva Andersson and Marianne Frisén, (2007), 'Similarities and differences between statistical surveillance and certain decision rules in finance' in Frisén, Marianne (ed.) Financial Surveillance, chapter 3, pages 69-92, Wiley.

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