Ensemble Properties of High Frequency Data and Intraday Trading Rules

27 Pages Posted: 9 Feb 2012 Last revised: 18 Jul 2013

See all articles by Fulvio Baldovin

Fulvio Baldovin

University of Padua

Francesco Camana

Prime Minister's Office

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Michele Caraglio

University of Padua

Attilio Stella

University of Padua

Date Written: February 9, 2012

Abstract

We demonstrate that a stochastic model consistent with the scaling properties of financial assets is able to replicate the empirical statistical properties of the S&P 500 high frequency data within a window of three hours in each trading day. This result extends previous findings obtained for EUR/USD exchange rates. We apply the forecast capabilities of the model to implement an explicit trading strategy. Trading signals are model-based and not derived from chartist criteria. In-sample and out-of-sample tests indicate that the model performs better than a benchmark asymmetric GARCH process, and expose the existence of small arbitrage opportunities. We discuss how to improve performances and why the trading strategy is potentially interesting to hedge volatility risk for S&P index-based products. nomalous scaling; Memory; Intraday returns; Intraday strategy.

Keywords: time series ensemble, trading rule, long memory

JEL Classification: C23, C53, C51

Suggested Citation

Baldovin, Fulvio and Camana, Francesco and Caporin, Massimiliano and Caraglio, Michele and Stella, Attilio, Ensemble Properties of High Frequency Data and Intraday Trading Rules (February 9, 2012). Available at SSRN: https://ssrn.com/abstract=2001981 or http://dx.doi.org/10.2139/ssrn.2001981

Fulvio Baldovin

University of Padua ( email )

Via 8 Febbraio, 2
Padova, Vicenza 35122
Italy

Francesco Camana

Prime Minister's Office ( email )

Via Barberini, 47
00187 Rome
Italy

Massimiliano Caporin (Contact Author)

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Michele Caraglio

University of Padua ( email )

Via 8 Febbraio 1848, 2
Padova, Vicenza 35122
Italy

Attilio Stella

University of Padua ( email )

Via 8 Febbraio, 2
Padova, Vicenza 35122
Italy

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