New Techniques  |  MAY 1998

Surfing The Linear Regression Curve . . . by Dennis Meyers, Ph.D.

Surfing The Linear Regression Curve With Bond Futures by Dennis Meyers, Ph.D. Linear regression, a statistical technique that fits a straight line to data points, can also be a proxy for a market trend. Here's a trading system that uses the measured percentage change of the trend of the Treasury bond market. The US Treasury bond futures contract is one of the most actively traded exchange contracts in the world. The US Treasury bond future is traded on the Chicago Board of Trade (CBT) and is used by major banks, institutions, and trading firms to trade, arbitrage and hedge their bond portfolios and associated derivative products. On the CBT, bond futures are traded from 7:20 am to 2 pm, and on the CBT Project A system, in the afternoons from 2:30 pm to 4:30 pm and in overnight session from 5:55 pm to 6:45 am. (The CBT recently discontinued the open outcry evening sessions in bond futures and replaced those sessions with the computerized Project A.) The trading volume in the US Treasury bond futures is big, and arbitrage keeps futures prices in line with the even larger over-the-counter Treasury bond market.

by Dennis Meyers, Ph.D.