Buy-and-Hold Benchmark

Buy-and-hold means purchasing an asset and holding it for the entire test period, incurring no per-trade costs. It is the profitability benchmark — distinct from the random-walk accuracy benchmark — that an active Markov Chain Trading Model must beat after Transaction Costs and Slippage to justify trading at all. None of the surveyed Markov-chain studies report a clean net-of-cost comparison against buy-and-hold; Aronsson Folkesson 2023 notes the OMXS30’s steady-state distribution implies a long-run upward drift that a passive holder would simply capture.

Connections

• Markov Chain Trading Model — compares_benchmark, source: https://kth.diva-portal.org/smash/get/diva2:1823899/FULLTEXT01.pdf