Mining Actionable Knowledge on Capital Market Data

Abstract

In financial markets, traders always pursue profitable trading strategies (also called trading rules) to make good return on investment. For instance, an experienced trader may use an appropriate pairs trading strategy, namely taking a long position in the stock of one company and shorting the stock of another in the same sector. A long position reflects the view that the stock price will rise; shorting reflects the opposite. This strategy may statistically increase profit while decreasing risk compared to a naive strategy of putting all money on one stock. In practice, an actionable strategy can not only maximize the profit or return, but also result in the proper management of risk and trading costs.