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A generalized framework for simultaneous long-short feedback trading

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journal contribution
posted on 2020-08-11, 10:25 authored by Joseph D. O'Brien, Mark E. Burke, Kevin BurkeKevin Burke
—We present a generalization of the Simultaneous Long-Short (SLS) trading strategy described in recent control literature wherein we allow for different parameters across the short and long sides of the controller; we refer to this new strategy as Generalized SLS (GSLS). Furthermore, we investigate the conditions under which positive gain can be assured within the GSLS setup for both deterministic stock price evolution and geometric Brownian motion. In contrast to existing literature in this area (which places little emphasis on the practical application of SLS strategies), we suggest optimization procedures for selecting the control parameters based on historical data, and we extensively test these procedures across a large number of real stock price trajectories (495 in total). We find that the implementation of such optimization procedures greatly improves the performance compared with fixing control parameters, and, indeed, the GSLS strategy outperforms the simpler SLS strategy in general.

Funding

Dynamics of the metabolic state in the context of a systematic approach to the study of the processes of growth and development of higher plants and fungi

Russian Foundation for Basic Research

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History

Publication

IEEE Transactions on Automatic Control;

Publisher

IEEE Computer Society

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peer-reviewed

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SFI

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© 2020 IEEE. Personal use of this material is permitted. Permission from IEEE must be obtained for all other uses, in any current or future media, including reprinting/republishing this material for advertising or promotional purposes, creating new collective works, for resale or redistribution to servers or lists, or reuse of any copyrighted component of this work in other works.

Language

English

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