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Menampilkan postingan dari Mei, 2014

Applying Corrective AI to Daily Seasonal Forex Trading

  By Sergei Belov, Ernest Chan, Nahid Jetha, and Akshay Nautiyal     ABSTRACT We applied Corrective AI (Chan, 2022) to a trading model that takes advantage of the intraday seasonality of forex returns. Breedon and Ranaldo (2012)   observed that foreign currencies depreciate vs. the US dollar during their local working hours and appreciate during the local working hours of the US dollar. We first backtested the results of Breedon and Ranaldo on recent EURUSD data from September 2021 to January 2023 and then applied Corrective AI to this trading strategy to achieve a significant increase in performance. Breedon and Ranaldo (2012) described a trading strategy that shorted EURUSD during European working hours (3 AM ET to 9 AM ET, where ET denotes the local time in New York, accounting for daylight savings) and bought EURUSD during US working hours (11 AM ET to 3 PM ET). The rationale is that large-scale institutional buying of the US dollar takes place during European working hours to pa

Short Interest as a Factor

Readers of will no doubt be impressed by this chart  and the accompanying article : Cumulative Returns of Most Shorted Stocks in 2013 Indeed, short interest (expressed as the number of shares shorted divided by the total number of shares outstanding) has long been thought to be a useful factor. To me, the counter-intuitive wisdom is that the more a stock is shorted, the better is its performance. You might explain that by saying this is a result of the "short squeeze", when there is jump in price perhaps due to news and stock lenders are eager to sell the stock they own. If you have borrowed this stock to short, your borrowed stock may be recalled and you will be forced to buy cover at this most inopportune time. But this is an unsatisfactory explanation, as this will result only in a short term (upward) momentum in price, not the sustained out-performance of the most shorted stocks. This long-term out-performance seems to suggest that short sellers are less inf