publication . Preprint . 2004

Investment strategy due to the minimization of portfolio noise level by observations of coarse-grained entropy

Krzysztof Urbanowicz; Janusz A. Holyst;
Open Access English
  • Published: 30 Dec 2004
Abstract
Using a recently developed method of noise level estimation that makes use of properties of the coarse grained-entropy we have analyzed the noise level for the Dow Jones index and a few stocks from the New York Stock Exchange. We have found that the noise level ranges from 40 to 80 percent of the signal variance. The condition of a minimal noise level has been applied to construct optimal portfolios from selected shares. We show that implementation of a corresponding threshold investment strategy leads to positive returns for historical data.
Subjects
free text keywords: Condensed Matter - Statistical Mechanics, Quantitative Finance - Statistical Finance

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publication . Preprint . 2004

Investment strategy due to the minimization of portfolio noise level by observations of coarse-grained entropy

Krzysztof Urbanowicz; Janusz A. Holyst;