This paper investigates how technical trading systems exploit the momentum and reversal effects in the S&P 500 spot and futures market. The former is exploited by trend-following models, while the latter by contrarian models. In total, the performance of 2580 widely used models is analyzed. When...

This paper investigates how technical trading systems exploit the momentum and reversal effects in the S&P 500 spot and futures market. When based on daily data, the profitability of 2580 technical models has steadily declined since 1960, and has been unprofitable since .the early 1990s....

Trading stops are often used by traders to risk manage their positions. In this note, we show how to derive optimal trading stops for generic algorithmic trading strategies when the P&L of the position is modelled by a Markov modulated diffusion. Optimal stop levels are derived by maximising the...

We develop a novel approach for the direct extraction of aggregated investor attention and relative risk aversion (RRA) from European option prices. Applying it to China 50ETF options data, we document several noteworthy findings. First, we introduce the option-implied attention (OIA) index,...

A specific day-trading policy in Taiwan futures market allows an investigation of the performance of day traders. Since October 2007, investors who characterize themselves as “day traders” by closing their day-trade positions on the same day enjoy a 50% reduction in the initial margin....

Behavioral finance tries to make sense of financial data using models that are based on psychologically accurate assumptions about people's beliefs, preferences, and cognitive limits. I review behavioral finance approaches to understanding asset prices and trading volume, with particular...