Annals of Operations Research

, Volume 45, Issue 1, pp 179–186 | Cite as

Another explanation for the bias observed in the filter rule test

  • Kazuo Kishimoto


Substantial bias in profits is observed when we apply Alexander's filter rule to the piecewise linear function formed by the linear interpolation of a past daily (weekly or monthly) stock price sequence. The only explanation for this phenomenon reported up to now is the possible discontinuity of the original price path. This paper demonstrates that the autocorrelation generated by the linear interpolation procedure causes this phenomenon even if the original path is a realization of the Brownian motion. It is also shown that the bias for the TOPIX index in the Tokyo Stock Exchange is substantially explained in our theoretical framework.


Linear Function Autocorrelation Brownian Motion Linear Interpolation Stock Price 
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Copyright information

© J.C. Baltzer AG, Science Publishers 1993

Authors and Affiliations

  • Kazuo Kishimoto
    • 1
  1. 1.Institute of Socio-Economic PlanningUniversity of TsukubaTsukuba, IbarakiJapan

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