ABSTRACT

Besides follow the winner and follow the loser, another category utilizes both winners and losers, and it is based on pattern matching. This category mainly covers nonparametric sequential investment strategies, which guarantee an optimal growth of capital under minimal assumptions on the market, that is, stationary and ergodic of the financial time series. Based on nonparametric prediction (Györfi and Schäfer 2003), this category consists of several pattern matching-based investment strategies (Györfi et al. 2006, 2007, 2008; Li et al. 2011a). Note that in the data-mining communities, some researchers focus on detecting important signals or patterns in time series (Mcinish and Wood 1992; Berndt and Clifford 1994; Agrawal and Srikant 1995; Srikant and Agrawal 1996; Ting et al. 2006; Cañete et al. 2008; Du et al. 2009), which is beyond our discussion.