Advertisement

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
Article
  • 51 Downloads

Abstract

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.

Keywords

Linear Function Autocorrelation Brownian Motion Linear Interpolation Stock Price 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. [1]
    S.S. Alexander, Price movements in speculative markets: trends or random walks, Ind. Manag. Rev. MIT 2 (1961) 7–26.Google Scholar
  2. [2]
    S.S. Alexander, Price movements in speculative markets: trends or random walks, no. 2, Ind. Manag. Rev. MIT 4 (1964) 25–46.Google Scholar
  3. [3]
    E.F. Fama and M.E. Blume, Filter rules and stock-market trading, J. Bus. 39 (1966) 226–241.Google Scholar
  4. [4]
    B.B. Mandelbrot, The variation of certain speculative prices, J. Bus. 36 (1963) 394–419.Google Scholar
  5. [5]
    L.C.G. Rogers and S.E. Satchell, Estimating variance from high, low and closing prices, Ann. Appl. Prob. 1 (1991) 504–512.Google Scholar

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

Personalised recommendations