Research ArticlesVolume 11, Spring 2017

Anomaly Correction by Optimal Trading Frequency

Yiqiao Yin

Columbia University, New York, NY, USA

Abstract

Under the assumption that security prices follow random walk, we look at price versus different moving averages. Different periods of moving averages give investor different signals and we assume that a rational investor would want to buy more when the price goes down. This paper provides a theoretical model for an investor to systematically buy heavy when the security prices go down.