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A method to get a more stationary process and its application in finance with high-frequency data of Chinese index futures

Author

Listed:
  • Li, Long
  • Bao, Si
  • Chen, Jing-Chao
  • Jiang, Tao

Abstract

Technical indicators have been widely used in financial markets for a long time. Wang and Zheng (2014) proposed in their book that the technical indicators can be transformed into the stationary process and investigated the profitability and availability. But in fact, we can only test that a data series form a weakly stationary process but a strongly stationary process. Nevertheless, the convergence of a more stationary process will vanish faster, thus it is much better if we can get a more stationary process. In this paper, we propose a method to get a more strongly (or weakly) process named mean reverting process that based on the original strongly (or weakly) stationary process. We particularly give some examples based on high-frequency data of CSI300 Stock Index Futures to show that some technical indicators are mean reverting process. We talk about its advantage and application in high frequency trading.

Suggested Citation

  • Li, Long & Bao, Si & Chen, Jing-Chao & Jiang, Tao, 2019. "A method to get a more stationary process and its application in finance with high-frequency data of Chinese index futures," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 525(C), pages 1405-1417.
    • Handle: RePEc:eee:phsmap:v:525:y:2019:i:c:p:1405-1417
    DOI: 10.1016/j.physa.2019.04.085
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    References listed on IDEAS

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