Sunday, June 14, 2015

statistical finance - What is the fastest common moving average?


I am trying to find what standard moving average would give me the fastest adjustment or strongest weight to most recent data, but without changing the number of periods.



Here is some sample data and some MAs.


data    5   5   5   10      10      10      10      10      10      10      10      10      10      10
wilde 5 5 5 5.3571 5.6888 5.9967 6.2827 6.5482 6.7948 7.0237 7.2363 7.4337 7.6170 7.7872
ma 5 5 5 5.3571 5.7143 6.0714 6.4286 6.7857 7.1429 7.5000 7.8571 8.2143 8.5714 8.9286
EMA 5 5 5 5.6667 6.2444 6.7452 7.1792 7.5553 7.8812 8.1637 8.4086 8.6208 8.8047 8.9640
weight 5 5 5 5.6667 6.2857 6.8571 7.3810 7.8571 8.2857 8.6667 9.0000 9.2857 9.5238 9.7143
exp wgh 5 5 5 5.9655 6.7980 7.5074 8.1034 8.5961 8.9951 9.3103 9.5517 9.7291 9.8522 9.9310

I start with all 5s and then move to all 10s. I am using 14 periods for all calculations.


The wilder ma is first as it seems to be the slowest with K = 1/N



The regular MA is next with the first value at 10 the same as wilder.


Then the standard EMA with K = 2/(N+1).


My preferred way is to multiply the most recent day by 14, previous by 13 and so on. Which seems is called the weighted moving average. The first values changing to 10 is the same for EMA and weighted.


Then the exponential weighted where I multiply by 14 squared or 196 and so on. This is really fast, but maybe too fast.


I am picking very specific data and clearly the exponential weighted is by far the fastest followed by weighted. Buy I don't think it is standard so no platform or software would have it built in.


What would be the fastest industry standard moving average and what are the known advantages and disadvantages of using it?




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