The views expressed here are those of the individual authors and not necessarily those of the JSM sponsors, their officers, or their staff.
Abstract Details
Activity Number:
|
135
|
Type:
|
Contributed
|
Date/Time:
|
Monday, August 1, 2011 : 8:30 AM to 10:20 AM
|
Sponsor:
|
Business and Economic Statistics Section
|
Abstract - #300621 |
Title:
|
Alpha Representation for Active Portfolio Management and High-Frequency Trading in Seemingly Efficient Markets
|
Author(s):
|
Godfrey Cadogan*+
|
Companies:
|
Ted Rogers School of Management
|
Address:
|
Institute for Innovation and Technology Management, Toronto, ON, M5G 2C5, Canada
|
Keywords:
|
market timing ;
efficient markets ;
high frequency trading ;
trade strategy ;
Brownian bridge ;
portable portfolio alpha
|
Abstract:
|
We introduce a trade strategy representation theorem for performance measurement and portable alpha in high-frequency trading, by embedding a robust trading algorithm that describe portfolio manager market timing behavior, in a canonical multifactor asset pricing model. First, we present a spectral test for market timing based on behavioral transformation of the hedge factors design matrix. Second, we find that the typical trade strategy process is a local martingale with a background driving Brownian bridge that mimics portfolio manager price reversal strategies. Third, we show that equilibrium asset pricing models like the CAPM exists on a set with P-measure zero. So that excess returns, i.e. positive alpha, relative to a benchmark index is robust to no arbitrage pricing in turbulent capital markets. Fourth, the path properties of alpha are such that it is positive between suitably chosen stopping times for trading. Fifth, we demonstrate how, and why, econometric tests of portfolio performance tend to under report positive alpha.
|
The address information is for the authors that have a + after their name.
Authors who are presenting talks have a * after their name.
Back to the full JSM 2011 program
|
2011 JSM Online Program Home
For information, contact jsm@amstat.org or phone (888) 231-3473.
If you have questions about the Continuing Education program, please contact the Education Department.