Take the 2-minute tour ×
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It's 100% free, no registration required.

I have constructed a mean reverting spread using two indexes. I know they have to be mean reverting, but when plotted side by side they are mean reverting for a little bit and then deviate and head one direction, all because of a few returns. I was wondering what the proper way of normalizing the trend or dealing with a non-stationary mean in a reverting series?

share|improve this question
    
I think I got it. Detrending the data has seemed to be the best way to normalize it. –  user5003 Mar 25 '13 at 4:35
2  
Can you reply to your own question giving more details about the steps you used to do it ? Or was it as simple as estimating the constant parameter and removing it ? –  BlueTrin Mar 25 '13 at 10:39
add comment

Know someone who can answer? Share a link to this question via email, Google+, Twitter, or Facebook.

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Browse other questions tagged or ask your own question.