Quantitative Trading Literature

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We collect a list of papers that are useful for learning about algorithmic trading and fostering further research.

General

  • Numerical Method Inc. publications
  • An Introduction to High-Frequency Finance. Ramazan Gençay, Michel Dacorogna, Ulrich A. Muller, Olivier Pictet, Richard Olsen. Academic Press. 2001.
  • Advanced Trading Rules, Second Edition. Emmanual Acar (Editor), Stephen Satchell (Editor). Butterworth-Heinemann; 2nd edition (June 19, 2002).

Pairs Trading

  • A New Approach to Modeling and Estimation for Pairs Trading, Binh Do, Robert Faff, Kais Hamza, Working Paper, May 29, 2006.
  • Pairs Trading – A Cointegration Approach. Arlen David Schmidt, Finance Honors Thesis, University of Sydney, November 2008, Pages 1–130.
  • Does Simple Pairs Trading Still Work? Binh Do , Robert Faff. Financial Analysts Journal. July/August 2010, Vol. 66, No. 4, pp: 83–95.
  • Implementation of Pairs Trading Strategies. Øyvind Foshaug. Faculty of Science. Koortweg- de Vries Institute for Mathematics. Master of Science Thesis. 2010.
  • Pairs trading. Elliott, van der Hoek, and Malcolm. Quantitative Finance, 2005.

Mean Reversion

  • When are contrarian profits due to stock market overreaction? Andrew W. Lo and A. Craig MacKinlay. Review of Financial Studies 3(1990), 175–206.
  • Identifying small mean-reverting portfolios. Alexandre D’Aspremont. Quantitative Finance, Volume 11 Issue 3 2011.
  • Statistical Arbitrage in the U.S. Equities Market. Marco Avellaneda and Jeong-Hyun Lee. July 11, 2008.
  • Optimal Pairs Trading: A Stochastic Control Approach. Mudchanatongsuk, S., Primbs, J.A., Wong, W. Dept. of Manage. Sci. & Eng., Stanford Univ., Stanford, CA.
  • Arbitrage Under Power. Michael Boguslavsky, Elena Boguslavskaya. 2004.
  • Identifying Small Mean Reverting Portfolios. Alexandre d’Aspremont. 2008.

Markov Models

  • Algorithmic Trading: Hidden Markov Models on Foreign Exchange Data. Patrik Idvall, Conny Jonsson. University essay from Linköpings universitet/Matematiska institutionen; Linköpings universitet/Matematiska institutionen. 2008.
  • Markov Switching Regimes in a Monetary Exchange Rate Model, Frömmel, Michael, MacDonald, Ronald, Menkhoff, Lukas, Economic Modelling, Vol. 22 (2005), 3, Pages 485–502.

Bayesian

  • Bayesian Adaptive Trading with a Daily Cycle. Robert Almgren, Julian Lorenz. The Journal of Trading. Fall 2006, Vol. 1, No. 4: pp. 38-46.
  • On the short-term predictability of exchange rates: A BVAR time-varying parameters approach. Nicholas Sarantis. Journal of Banking & Finance, Volume 30, Issue 8, August 2006, Pages 2257-2279.

Time Series Analysis

  • Time Series Technical Analysis via New Fast Estimation Methods: A Preliminary Study in Mathematical Finance. Michel Fliess. Cédric Join. Published – Presented, IAR-ACD08 (23rd IAR Workshop on Advanced Control and Diagnosis), 2008, Coventry, United Kingdom.
  • A Trading Strategy Based on the Lead-Lag Relationship between the FTSE 100 Spot Index and the LIFFE Traded FTSE Futures Contract. Brooks, C., A.G. Rew and S. Ritson. International Journal of Forecasting 17, 31-44. 2001.
  • Basket trading under co-integration with the logistic mixture autoregressive model. Xixin Cheng, Philip L. H. Yu, W. K. Li. Quantitative Finance, 1469-7696, First published on 09 December 2010.
  • Towards a non-linear trading strategy for financial time series. Fernanda Strozzia, and José-Manuel Zaldívar Comenges. Chaos, Solitons & Fractals. Volume 28, Issue 3, May 2006, Pages 601-615.

Trend Following/Momentum

  • A Test of Momentum Trading Strategies in Foreign Exchange Markets: Evidence from the G7, Robert J. Bianchi, Michael E. Drew, and John Polichronis, Global Business and Economics Review, Vol. 7 (2005), 2-3, Pages 155–179.
  • A Momentum Trading Strategy Based on the Low Frequency Component of the Exchange Rate, Richard D. F. Harris and Fatih Yilmaz, Journal of Banking and Finance, 33 (2009), 9, Pages 1575–1585.
  • collection of papers on momentum
  • Thou shalt buy and hold. Albert Shiryaeva, Zuoquan Xu, Xun Yu Zhoubc. Quantitative Finance. Volume 8, Issue 8 December 2008 , pages 765 – 776.
  • Optimal Trend Following Trading Rules. Min Dai, Qing Zhang, Qiji Jim Zhu. 2011.

Technical Indicators

  • A dynamic analysis of moving average rules. Carl Chiarella, Xue-Zhong He, and Cars Hommes. Journal of Economic Dynamics and Control, Volume 30, Issues 9-10, September-October 2006, Pages 1729-1753.
  • Do the technical indicators reward chartists? A study on the stock markets of China, Hong Kong and Taiwan. Wing-Keung Wong, Jun Du, Terence Tai-Leung Chong. 2005.
  • A comparison of MA and RSI returns with exchange rate intervention. Thomas C. Shik, Terence Tai-Leung Chong. Applied Economics Letters, Volume 14, Issue 4 – 6 April 2007 , pages 371 – 383.

News & Announcements

  • Does beta react to market conditions? Estimates of ‘bull’ and ‘bear’ betas using a nonlinear market model with an endogenous threshold parameter. George Woodward, Heather Anderson, 2009. Journal of Quantitative Finance. March, 2009.
  • Short-term market reaction after extreme price changes of liquid stocks. Adám G. Zawadowski, György Andor, János Kertész, 2007. Journal of Quantitative Finance. May, 2007.

Misc

  • Modeling and Forecasting Stock Return Volatility Using a Random Level Shift Model. Yang K. Lu, Pierre Perron. 2009. Journal of Empirical Finance, Elsevier, vol. 17(1), pages 138-156.
  • Predictability of nonlinear trading rules in the U.S. stock market. Terence Tai-Leung Chonga, Tau-Hing Lama. 2010. Journal of Quantitative Finance. Issue 9, Volume 10, 2010.
  • A Reality Check for Data Snooping. Halbert White. 2000. Econometrica. Issue 5, Volume 68, 2000.
  • A Test for Superior Predictive Ability. Peter Reinhard Hansen. 2005. Brown Univ. Dept. of Economics Working Paper No. 01-06.

Risk Management

  • Extreme Value Theory and Fat Tails in Equity Markets. Blake LeBaron and Ritirupa Samanta. May, 2004.