Optimal trading frequency for active asset management: Evidence from technical trading rules

Dunis, Christian L.; Miao, Jia

doi:10.1057/palgrave.jam.2240149

Cited by 15 publications

(3 citation statements)

References 9 publications

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“…The visual representations emphasize that active strategies can mitigate downside risk and contribute to more favorable investment outcomes in the green hydrogen space. Overall, these findings underscore the crucial role of active trading strategies in dynamic markets that are subject to rapid shifts, supporting the conclusion of Dunis and Miao (2005).…”

Section: Resultssupporting

confidence: 71%

Enhancing Sustainable Finance through Green Hydrogen Equity Investments: A Multifaceted Risk-Return Analysis

Tudor

2023

Risks

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Amidst the global push for decarbonization, green hydrogen has gained recognition as a versatile and clean energy carrier, prompting the financial sector to introduce specialized investment instruments like Green Hydrogen Exchange-Traded Funds (ETFs). Despite the nascent nature of research on green hydrogen portfolio performance, this study examines two key green hydrogen ETFs (i.e., HJEN and HDRO) from April 2021–May 2023, aiming at conducting a multifaceted exploration of their performance, isolating and measuring their sensitivity to the primary market factor, and assessing the capabilities of systematic trading strategies to preserve capital and minimize losses during market downturns. The results spotlight lower returns and higher risks in green hydrogen investments compared to conventional equity (proxied by ETFs offering exposure to developed markets—EFA and emerging markets—EEM) and green energy portfolios (proxied by the ETF ICLN). To comprehensively evaluate performance, an array of risk-adjusted metrics, including Std Sharpe, ES Sharpe, VaR Sharpe, Information ratio, Sortino ratio, Treynor ratio, and various downside risk metrics (historical VaR, modified VaR, Expected Shortfall, loss deviation, downside deviation, and maximum drawdown) are employed, offering a nuanced understanding of the investment landscape. Moreover, single-factor models highlight significant systematic market risk, reflected in notably high beta coefficients, negative alphas, and active premia, underscoring the sensitivity of green hydrogen investments to market fluctuations. Despite these challenges, a silver lining emerges as the study demonstrates the efficacy of implementing straightforward Dual Moving Average Crossover (DMAC) trading strategies. These strategies significantly enhance the risk-return profile of green hydrogen portfolios, offering investors a pathway to align financial and social objectives within their equity portfolios. This research is motivated by the need to provide market players, policymakers, and stakeholders with valuable insights into the benefits and risks associated with green hydrogen investment, considering its potential to reshape the global energy landscape.

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Section: Resultssupporting

confidence: 71%

Enhancing Sustainable Finance through Green Hydrogen Equity Investments: A Multifaceted Risk-Return Analysis

Tudor

2023

Risks

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“…As mentioned by Bertolini (2010), there are few papers on market-timing techniques for foreign exchange, with the notable exception of Dunis and Miao (2005). The opposition between market-timing techniques and time-varying leverage is only apparent as time-varying leverage can also be easily achieved by scaling position sizes inversely to recent risk measures behaviour.…”

Section: Leverage To Exploit High Information Ratiosmentioning

confidence: 99%

Forecasting foreign exchange rates with adaptive neural networks using radial-basis functions and Particle Swarm Optimization

Sermpinis

Theofilatos

Karathanasopoulos

et al. 2013

European Journal of Operational Research

137

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“…In Cointegration-based optimisation of currency portfolios particular, longer-term MAs seem to be the best performing over these periods, where positions can be held for longer and losses are not made because of short-term price swings, something already underlined by Dunis and Miao. 31 Different trading rules could have been investigated, but this was not the aim for this article. Some of the portfolios yield good results, which suggest that technical analysis still has a role to play when it comes to trading currencies.…”

Section: Overall Analysismentioning

confidence: 99%

Cointegration-based optimisation of currency portfolios

Dunis

Laws²,

Shone³

2011

J Deriv Hedge Funds

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Cointegration is a technique that has been used for some time to optimise equity portfolios, but there is limited evidence of its application in managing currency portfolios. This research examines whether there is any value to be gained by using cointegration-based strategies to optimise currency portfolios that are US dollar, euro and sterling based, respectively. We build 'major currency pair tracking' portfolios to replicate the classic index tracking strategy commonly applied to equity portfolios, overcoming the lack of an 'index' for currencies by using the most frequently traded currency pair for each portfolio, namely the EUR/USD for the US dollar and euro portfolios, whereas the GBP/ USD is used for the sterling portfolios. We compare the out-of-sample performances of these portfolios to simple benchmark techniques of optimisation. The results are encouraging, with the detection of long-run relationships adding value, particularly for the sterling portfolios. Owing to the generally low volatile nature of the cointegration portfolios, they could be leveraged to match the returns being offered to investors by the benchmarks, as they generally offered better risk-adjusted returns. They also enhance portfolio stability. There are several side issues that are also discussed, such as whether profits can still be derived from applying simple trading rules to currency portfolios, and if so what are the best currencies to invest in and how far should an investor internationally diversify their portfolios. Some of the results found are encouraging, and point towards the added value given by 'lesser' currencies, particularly the Scandinavian currencies, with the Swedish Krona appearing to boost the risk-adjusted returns of portfolios. Technical analysis is shown to still have a role to play in currency trading.

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Optimal trading frequency for active asset management: Evidence from technical trading rules

Cited by 15 publications

References 9 publications

Enhancing Sustainable Finance through Green Hydrogen Equity Investments: A Multifaceted Risk-Return Analysis

Enhancing Sustainable Finance through Green Hydrogen Equity Investments: A Multifaceted Risk-Return Analysis

Forecasting foreign exchange rates with adaptive neural networks using radial-basis functions and Particle Swarm Optimization

Cointegration-based optimisation of currency portfolios

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