Convexity-Concavity Indicators and Automated Trading Strategies Based on Gradient Boosted Classification Trees Models

Qun ZHANG

Abstract


This paper uses the visibility and invisibility algorithms to build the peak and trough indicators, providing a way to recognize the convexity, concavity and regime change of the CSI 300 Index from the April 8, 2005 to June 30, 2016. The study found that the automated trading rules discovered by the gradient boosted classification trees models derived from the peak indicator outperform that from the trough indicator. Due to the long-term bubble regime in the Chinese stock market, the technical trading rules in general have a better short term predictive ability than long term, in terms of the values of Sharpe Ratio and PnL/MD obtained from the whole out-of-sample.


Keywords


Trading strategy; Machine learning; Boosting; Binary classication; Regime shift

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DOI: http://dx.doi.org/10.3968/%25x

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