Article ID Journal Published Year Pages File Type
5089350 Journal of Banking & Finance 2013 43 Pages PDF
Abstract
This paper contributes to technical analysis (TA) literature by showing that the high and low prices of equity shares are largely predictable only on the basis of their past realizations. Moreover, using their forecasts as entry/exit signals can improve common TA trading strategies applied on US equity prices. We propose modeling high and low prices using a simple implementation of a fractional vector autoregressive model with error correction (FVECM). This model captures two fundamental patterns of high and low prices: their cointegrating relationship and the long-memory of their difference (i.e., the range), which is a measure of volatility.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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