Economic and Statistical Properties of Implementable Trading Strategies

35 Pages Posted: 31 Dec 2009 Last revised: 1 Feb 2010

See all articles by Andrew Christie

Andrew Christie

Louisiana State University, Baton Rouge

Date Written: December 29, 2009

Abstract

Capital market studies typically report one set of results that tests for both economic and statistical significance. Statistical significance is necessary, but not sufficient, for economic significance, which requires that a trading scheme earns abnormal returns, after information costs, transactions costs, the opportunity cost of capital, and adjustment for risk preferences. Such a strategy must be implementable in real time, not CRSP/Compustat time. Typical research designs are evaluated in the context of economic and statistical properties of implementable trading schemes. Applying the analysis to well known accounting papers suggests that abnormal returns cannot be earned based on publicly available information.

Keywords: Trading profits, Abnormal returns, Transactions costs, Implementable

JEL Classification: G11, G14, M41

Suggested Citation

Christie, Andrew, Economic and Statistical Properties of Implementable Trading Strategies (December 29, 2009). Available at SSRN: https://ssrn.com/abstract=1529821 or http://dx.doi.org/10.2139/ssrn.1529821

Andrew Christie (Contact Author)

Louisiana State University, Baton Rouge ( email )

Louisiana State University
Baton Rouge, LA 70803
United States

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