The moving averages demystified |
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Institution: | 1. Neuroscience Graduate Interdisciplinary Program, University of Arizona, Tucson, AZ, United States;2. Department of Psychology, University of Arizona, Tucson, AZ, United States;3. Department of Neurology, University of Arizona, Tucson, AZ, United States;4. BIO5 and McKnight Brain Research Institutes, University of Arizona, Tucson, AZ, United States |
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Abstract: | A common method in technical analysis is the construction of moving averages along time series of stock prices. We show that they present a practical interest for physicists, and raise new questions on fundamental ground. Indeed, self-affine signals characterized by a defined roughness exponent H can be investigated through moving averages. The density ρ of crossing points between two moving averages is shown to be a measure of long-range power-law correlations in a signal. Finally, we present a specific transform with which various structures in a signal, e.g. trends, cycles, noise, etc. can be investigated in a systematic way. |
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