Fixed Threshold Strategy (FTS)

According to Fung et al. (2000), Grant et al. (2005), and Caporale and Plastun (2017), the fixed threshold strategy (FTS) detects abnormal overnight changes using a fixed threshold of ±0.20 percent. This benchmark strategy obtains an individual trading limit for each stock. In our framework, the top 10 stocks with the highest absolute changes were opened at 9:30 of the trading day. We went long in the undervalued stocks and went short in the overvalued stocks. Identical to JDS, the positions were reversed 120 min after market opening. This approach was not in a position to distinguish stocks on the basis of their fluctuation behavior.
