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Activity Number:
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574
- Statistical Inference in Finance
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Type:
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Topic Contributed
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Date/Time:
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Wednesday, August 1, 2018 : 2:00 PM to 3:50 PM
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Sponsor:
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Section on Statistics in Marketing
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Abstract #329399
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Presentation
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Title:
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Mean Reversion Trading via Penalized Maximum Likelihood Estimation and Optimization
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Author(s):
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Jize Zhang* and Aleksandr Aravkin and Tim Leung
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Companies:
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University of Washington, Seattle and University of Washington, Seattle and University of Washington, Seattle
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Keywords:
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optimization in finance;
mean-reverting portfolio
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Abstract:
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In this talk, we discuss the statistical and optimization techniques for the problem of constructing a mean-reverting portfolio of assets. There are multiple assets that can be used for long and short positions. Based on an Ornstein-Uhlenbeck model, we design a penalized maximum likelihood estimation (MLE) approach that allows us to control the speed of mean reversion of the resulting portfolio. We present the full algorithm and test it using both simulated and empirical price data.
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Authors who are presenting talks have a * after their name.
