On the Bound of Cumulative Return in Trading Series

Abstract There is no doubt that cumulative return is one of fundamental concerns in financial markets. In this paper, we first reveal the upper bound of cumulative return, and then propose a method to evaluate the performance of trading strategies by using proposed upper bound. Furthermore, with the help of bootstrap methodology, we conduct numerous experiments on distinct international stock markets, including developed markets and emerging markets, to verify the validity of the proposed upper bound. And both the theoretical and empirical results show that the effectiveness of the proposed upper bound and reveal its significant potentials on evaluating performance of trading rules.