Algorithmic trading strategies using dynamic mode decomposition: applied to Turkish stock market

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2017

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Savaş, Mehmet Can

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Algorithmic trading schemes are growing of importance in modern ﬁnancial world. Each year, increasing proportion of the total trading volume is handled by algorithmic trading systems and they have become a fundamental element of modern day trading. We demonstrate the application of an algorithmic trading strategy using dynamic mode decomposition and genetic algorithm. The dynamic mode decomposition is a data analysis tool which is capable of characterizing the dynamical systems in an equation free manner by decomposing the system into low-rank structures, dynamic modes, whose temporal evolution is known. The method enables ﬁnancial market prediction using dynamic modes. In order to improve the prediction success of the method, we use a complementary technical analysis tool which is optimized with genetic algorithm. We are able to build algorithmic trading strategies using dynamic mode decomposition and test them in Turkish stock market. We conclude that dynamic mode decomposition is a capable method to analyze stock markets.

Subject Keywords

Dynamics., Algorithms., Investments., Stock exchanges., Portfolio management.

URI

http://etd.lib.metu.edu.tr/upload/12621107/index.pdf
https://hdl.handle.net/11511/26714

Collections

Graduate School of Applied Mathematics, Thesis

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Citation Formats

M. C. Savaş, “Algorithmic trading strategies using dynamic mode decomposition: applied to Turkish stock market,” M.S. - Master of Science, Middle East Technical University, 2017.