FNCE 4308 Introduction to Algorithmic Trading Assignment Help

FNCE 4308 Introduction to Algorithmic Trading Assignment Help

Course name and number: FNCE 4308 – Introduction to Algorithmic Trading

You are required to submit your report in a Word document, as well as all .m and .mat files on HuskyCT.

(1) Download at least 3 years of daily prices of a financial instrument other than S&P 500 ETFs.

(2) Use the SmallrTree.m script to estimate a regression tree that predicts the 1-day return and uses the 1-, 2-, 5-, and 20-day returns as potential predictors. Submit a picture of the regression tree in your report.

(3) Modify the SmallrTree.m script to backtest a strategy that takes a long position based on the path (in the tree from question 2) that yields the highest expected 1-day return, and a short position based on the path that yields the lowest expected 1-day return.

For example, the below tree suggests a long position for days when the 2-day return is less than 1.53% and the 1-day return is less than -1.39%; that path yields the highest 1-day expected return of 0.47%. A short position should be taken on days when the 2-day return is greater than 1.53%.

(4) Modify the stationarityTests.m script to run the ADF and variance-ratio tests, estimate the Hurst exponent, estimate the half life of mean reversion, and backtest the strategy discussed in class. The strategy calls for a dollar amount of a position equal to -1 * (price – its moving average )/its moving standard deviation.

(5) Which strategy seems to be more profitable? Why?

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