Influence of Range to Standard Deviation Ratio on Results of a Trading Rule

S. K. Mitra

Abstract


This paper examines relationship between Range to Standard deviation ratio (R/S ratio) and the profitability of a trading rule using stock prices of Indian market. The R/S ratios are expected to detect long-term dependencies in a time series. If dependencies are found, the dependency can be used to develop strategies for profitable trades.
The larger the R/S ratio, the stronger is the trend and higher is the chance of technical trading rule giving profitable results. It was found that during the periods of high R/S ratios, a trend following trading rule could predict price movement of the series more accurately.

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Asian Social Science   ISSN 1911-2017 (Print)   ISSN 1911-2025 (Online)

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