Work

A Generalized Framework for Simultaneous Long-Short Feedback Trading

Year: 2020

Type: article

Abstract: We present a generalization of the simultaneous long-short (SLS) trading strategy described in recent control literature wherein we allow for different parameters across the short and long sides of the controller; we refer to this new strategy as generalized SLS (GSLS). Furthermore, we investigate the conditions under which positive gain can be assured within the GSLS setup for both deterministic stock price evolution and geometric Brownian motion. In contrast to existing literature in this area (which places less emphasis on the practical application of SLS strategies), we suggest optimization procedures for selecting the control parameters based on historical data, and we extensively test these procedures across a large number of real stock price trajectories (495 in total). We find that the implementation of such optimization procedures greatly improves the performance compared with fixing control parameters, and, indeed, the GSLS strategy outperforms the simpler SLS strategy in general.

Source: IEEE Transactions on Automatic Control

DOI: 10.1109/tac.2020.3011914

Authors: Joseph D. O'Brien, Mark E. Burke, Kevin Burke

Institution: University of Limerick

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: Royal Irish Academy, Science Foundation Ireland, Irish Research Council

Award: Mathematical Modelling of Social Spreading Phenomena