Mean reversion is a feature largely recognized for the price processes of many financial securities and especially commodities. In the literature there are examples where some simple speculative strategies, before transaction costs, were devised to earn excess returns from such price processes. Actually, the gain opportunities of mean reversion must be corrected to account for transaction costs, which may represent a major issue. In this work we try to determine sufficient conditions for the parameters of a mean reverting price process as a function of transaction costs, to allow a speculative trader to have positive expectations when deciding to take a position. We estimate the mean reverting parameters for some commodities and correct them for transaction costs to assess whether the potential inefficiency is actually relevant for speculative purposes. (C) 2004 Elsevier B.V. All rights reserved

Carcano, G., Falbo, P., Stefani, S. (2005). Speculative trading in mean reverting markets. EUROPEAN JOURNAL OF OPERATIONAL RESEARCH, 163(1), 132-144 [10.1016/j.ejor.2004.01.002].

Speculative trading in mean reverting markets

CARCANO, GIOVANNA;STEFANI, SILVANA
2005

Abstract

Mean reversion is a feature largely recognized for the price processes of many financial securities and especially commodities. In the literature there are examples where some simple speculative strategies, before transaction costs, were devised to earn excess returns from such price processes. Actually, the gain opportunities of mean reversion must be corrected to account for transaction costs, which may represent a major issue. In this work we try to determine sufficient conditions for the parameters of a mean reverting price process as a function of transaction costs, to allow a speculative trader to have positive expectations when deciding to take a position. We estimate the mean reverting parameters for some commodities and correct them for transaction costs to assess whether the potential inefficiency is actually relevant for speculative purposes. (C) 2004 Elsevier B.V. All rights reserved
Articolo in rivista - Articolo scientifico
decision analysis, mean reverting, processes, commodity markets, optimal strategy, simylation analysis
English
2005
163
1
132
144
none
Carcano, G., Falbo, P., Stefani, S. (2005). Speculative trading in mean reverting markets. EUROPEAN JOURNAL OF OPERATIONAL RESEARCH, 163(1), 132-144 [10.1016/j.ejor.2004.01.002].
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/2322
Citazioni
  • Scopus 11
  • ???jsp.display-item.citation.isi??? 9
Social impact