Quiet! Is Stock Market Noise Reduction Profitable?

Adrian Letchford

    Research output: ThesisDoctoral Thesis

    122 Downloads (Pure)

    Abstract

    If you ever talk nance, in a blink of an eye your audience's face feels
    as if they have been hit by a truck and slammed into a solid concrete
    bunker. Exaggerations aside, one can hardly blame them. The desire
    to line pockets with little green pieces of paper has lead to complicated
    monetary philosophies. In one camp there are technical analysts, in
    another value investors, then financial engineer or "quants", and finally
    astrologists are thrown into the mix. Everyone has a different idea on
    how to conduct this business.

    In this thesis, we are going to scientically look at thoroughly used
    tools from technical analysis - the moving averages. These are filters
    which smooth noisy fluctuations from asset prices highlighting trends;
    they show the bigger picture. We will pull these models apart and explore
    them. Our aim is to discover what the relationship between smoothing
    and return actually looks like, and to answer the question: does smoothing
    really make us more competitive? We need to know this before we
    start investing real dollars.

    We will answer this question with a three step process. In the first
    step I will show you how to measure smoothness and other properties of
    filters. In the second step, I will show you new fllters which optimally
    smooth and allow you to control the amount of smoothing. Lastly, using
    our new ability to measure and control smoothing, we will look at the
    aect on returns. All contributions are listed in Chapter 5 on page 139.

    Ultimately, we will discover that filtering offers no "edge" to investing.
    However, as smoothing increases, transactions and the money spent on them decrease.
    Original languageEnglish
    QualificationDoctor of Philosophy
    Awarding Institution
    • Charles Sturt University
    Supervisors/Advisors
    • Zheng, Lihong, Co-Supervisor
    • Gao, Junbin, Principal Supervisor
    Award date07 Oct 2014
    Place of PublicationAustralia
    Publisher
    Publication statusPublished - 2014

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  • Cite this

    Letchford, A. (2014). Quiet! Is Stock Market Noise Reduction Profitable?. Charles Sturt University.