4.2 - Macro and Managed Futures Funds

Question 1

Simple Moving Average

Answer 1

SMA = (Σ(Pt-1)) / n

Pt-1 -> closing price on day t minus 1

Question 2

Weighted Moving Average

Answer 2

WMA = (n/N)(Pt-1) + (n-1 / N)(Pt-2) + … (1/N)(Pt-n)

N = 1+ 2 + 3 + … + n

ie: (3/6)510 + (2/6)508 + (1/6)*511 = 509.5
* larger weight on more recent observations

Question 3

Exponential Moving Average

Answer 3

EMA = λ(Pt-1) + λ(1-λ)(Pt-2) + λ(1-λ)^2(Pt-3)…

Where λ is a smoothing factor

Question 4

Relative Strength Index

Answer 4

• Used to determine the extent to which a market is overbought or oversold

RSI = 100 - (100 / (1+(U/D))

Where… U = avg. of price changes for all up days over last n days
D = avg. of absolute value of price changes for all down days for last n days