# Using Macroeconomic Forecasts to Improve Mean Reverting Trading Strategies

## TL;DR

This paper enhances mean reversion trading strategies by integrating macroeconomic forecasts through machine learning, leading to improved returns and demonstrating the importance of macroeconomic indicators in trading.

## Contribution

It introduces a novel approach of incorporating macroeconomic forecasts into yield curve mean reversion strategies using machine learning to optimize trading signals.

## Key findings

- Improved annual percentage returns (APR) with macroeconomic integration
- Machine learning effectively weights trading signals based on macroeconomic forecasts
- Macroeconomic indicators significantly enhance trading strategy performance

## Abstract

A large class of trading strategies focus on opportunities offered by the yield curve. In particular, a set of yield curve trading strategies are based on the view that the yield curve mean-reverts. Based on these strategies' positive performance, a multiple pairs trading strategy on major currency pairs was implemented. To improve the algorithm's performance, machine learning forecasts of a series of pertinent macroeconomic variables were factored in, by optimizing the weights of the trading signals. This resulted in a clear improvement in the APR over the evaluation period, demonstrating that macroeconomic indicators, not only technical indicators, should be considered in trading strategies.