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Trading model with pair pattern strategies

Ren, F. ; Zhang, Yi-Cheng

In: Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, no. 22, p. 5523-5534

A simple trading model based on pair pattern strategy space with holding periods is proposed. Power-law behavior is observed for the return variance σ², the price impact H and the predictability K for both models, with linear and square root impact functions. The sum of the traders’ wealth displays a positive value for the model with a square root price impact function,...