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Stochastic volatility model and technical analysis of stock price

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Abstract

In the stock market, some popular technical analysis indicators (e.g. Bollinger Bands, RSI, ROC, ...) are widely used by traders. They use the daily (hourly, weekly, ...) stock prices as samples of certain statistics and use the observed relative frequency to show the validity of those well-known indicators. However, those samples are not independent, so the classical sample survey theory does not apply. In earlier research, we discussed the law of large numbers related to those observations when one assumes Black-Scholes’ stock price model. In this paper, we extend the above results to the more popular stochastic volatility model.

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Authors and Affiliations

  1. Department of Statistics, Shanghai Finance University, Shanghai, 201209, P. R. China

    Wei Liu

  2. Department of Statistics, East China Normal University, Shanghai, 200062, P. R. China

    Wei An Zheng

Authors
  1. Wei Liu
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  2. Wei An Zheng
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Correspondence to Wei Liu.

Additional information

Partially supported by National Natural Science Foundation of China (Grant No. 10971068), National Basic Research Program of China (973 Program) (Grant No. 2007CB814904) and Key Subject Construction Project of Shanghai Education Commission (Grant No. J51601)

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Liu, W., Zheng, W.A. Stochastic volatility model and technical analysis of stock price. Acta. Math. Sin.-English Ser. 27, 1283–1296 (2011). https://doi.org/10.1007/s10114-011-9468-1

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  • DOI: https://doi.org/10.1007/s10114-011-9468-1

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