Automatic Portfolio Rebalancing System Design Using Volatility Prediction Models and Technical Analysis Combination

Document Type : Research Paper

Authors

1 MSc. Student in Financial Engineering, Faculty of Industrial engineering, k. N. Toosi University of technology, Tehran, Iran

2 Assistant Prof., Faculty of Industrial engineering, k. N. University of technology, Tehran, Iran

Abstract

The management of financial portfolios or funds constitutes a widely known problematic in financial markets which normally requires a rigorous analysis in order to select the most profitable assets. In this field designing profitable automated trading systems, which could trade dynamically and make appropriate decisions is significantly important.
Technical analysis is a popular method to predict future price movement. One of the deficiencies of technical analysis is lack of attention to risk of investing and portfolio management. This study has developed automated portfolio management systems using technical analysis indicators to find uptrend price movements and hired GARCH and FIGHARCH models to consider the risk in the decisions. The developed model has assayed in one year time scope. The results illustrate that using FIGARCH models has made superior return to risk ratio. Also the ratio shows that the developed models is significantly better, comparing the other investing methods such as Markowitz model and buy and hold strategy.

Keywords

References

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History

  • Receive Date: 04 March 2017
  • Revise Date: 10 September 2018
  • Accept Date: 13 November 2018

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