What a Time-Series Model Implies about Trading Strategies

The purpose of this paper is to put forward basic trading strategies that are the product of econometric modelling. We develop two basic divisions of these trading strategies: first-order and higher order. First-order trading... [ view full abstract ]

The purpose of this paper is to put forward basic trading strategies that are the product of econometric modelling. We develop two basic divisions of these trading strategies: first-order and higher order. First-order trading strategies are applicable for situations where simply going long or short is an appropriate response to a given financial instrument’s data generating process. Higher-order trading strategies move beyond trading short and long with market orders. This paper adds to the body of work that connects trading strategies to econometric modelling.