Beating the Benchmark - an Active Trading Strategy Based on Contrarian Trends and Jump Detection
Extreme price changes are identified in the stock market and related to jumps in the price process. After such extreme events, a reverting (also called contrarian) trend is examined. There is evidence that the initial price change is often an overreaction, caused by the psychology of market participants, and that the subsequent reversal corrects for the temporary inefficiencies in the market. Conf