A growth maximizing contrarian trading strategy
| Author: | Bc Marek Janča |
|---|---|
| Year: | 2011 - summer |
| Leaders: | prof. PhDr. Ladislav Krištoufek Ph.D. |
| Consultants: | |
| Work type: | Bachelors |
| Language: | English |
| Pages: | 63 |
| Awards and prizes: | B.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good bachelors diploma thesis. |
| Link: | |
| Abstract: | The purpose of our thesis is to build a contrarian trading strategy that would maxi- mize growth rate of our wealth. In the rst part, we derive the strategy by algebraic means. In particular, we exploit that growth maximization is equivalent to period by period maximization of log wealth. We approximate the log optimal portfolio by a mean-variance ecient portfolio and specify the rst and second conditional moment by a dynamic econometric model. In the second part, we discuss de ciencies of our strategy and use Monte Carlo simulations to create a modi cation that should per- form better. In the nal part, we demonstrate viability of the strategy on historical data. Assuming unlimited leverage and mild transaction costs, the strategy was able to generate annual geometric mean return close to 24% |
| Downloadable: | Bachelor Thesis of Janča |
