A New Theory of Stock Trading Based on Robust Control Concepts
Date:
04 Oct, 2017 (Wed)
Time:
11:00 am
Location:
Room 603, Chow Yei Ching Building

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Speaker

Professor B. Ross Barmish
ECE Department
University of Wisconsin

Abstract

The motivation for this research is derived from the voluminous literature studying the profitability of technically-based stock-trading strategies. Suffice it to say, the literature is controversial. Some authors claim their empirical studies using historical data demonstrate efficacy of technical analysis while others claim that such studies are flawed; e.g., factors such as problems in testing procedures and data snooping lead to unduly optimistic results. With these considerations in mind, in this talk, I will provide an overview of a new paradigm for stock trading inspired by robust control theory. In contrast to the existing literature, the argument for efficacy of technical analysis will be based on theory rather than back-testing using historical data. To this end, we will consider a pyramid-style trend-following trade management rule which we call “Simultaneous Long-Short.” In an idealized market characterized by perfect liquidity, zero transaction costs and other classical assumptions, we describe a number of theoretically provable robustness properties of the trading system. One of the main takeaways from this talk should be that success of some technically-based trading systems are more rooted in sound money management than predictions about future prices.

 

Biography of the speaker:

Ross Barmish is Professor of Electrical and Computer Engineering at the University of Wisconsin, Madison. Prior to joining UW in 1984, he held faculty positions at Yale University and the University of Rochester. From 2001-2003, he served as Chair of the EECS Department at Case Western Reserve while holding the Nord endowed professorship. He received his Bachelor’s degree in EE from McGill University and the M.S. and Ph.D. degrees, also in EE, from Cornell University.

Throughout his career, he has served the IEEE Control Systems Society in many capacities and has been a consultant for a number of companies. Professor Barmish is the author of the textbook “New Tools for Robustness of Linear Systems” and is a Fellow of both the IEEE and IFAC for his contributions to robust control. He received two Best Journal Publication awards, each covering a three-year period, from the International Federation of Automatic Control and has given a number of keynotes and plenary lectures at major conferences. In 2013, he received the IEEE Control Systems Society Bode Prize.

While his earlier work concentrated on robustness of dynamical systems, his current university research involves building a bridge between feedback control theory and trading in complex financial markets. In addition to this academic pursuit, in his capacity as CEO of Robust Trading Solutions, his work involves transition of stock-trading algorithms from theory to practice and government sponsored research on the NASDAQ Limit Order Book.


Organizer

Dr. G. Chesi

The seminars are open to the general public, free of charge, unless otherwise stated. Registration is not required. Arrangement for car parking facilities on campus please contact us for details.

For enquiries, please contact:
Department of Electrical and Electronic Engineering,
Room 601, Chow Yei Ching Building,
Pokfulam Road, Hong Kong
Tel: (852) 2859 7093
Email: seminar@eee.hku.hk