3
votes
1answer
313 views

How is the MA (moving average model) useful?

How is the MA model useful in modeling financial data, for example the stock indices? For example, from what i understand in the AR (auto-regressive) model portion, we can use the ADF test to check ...
1
vote
3answers
340 views

What does it mean by autocorrelation coefficient near 1?

It is said that the time series has a stochastic trend if the first autocorrelation coefficient will be near 1. Q1) What does it mean by the above statement? Q2) How do we calculate the first ...
2
votes
3answers
307 views

Why do long-term equity return forecast models use dependent observations?

I've been reading up on different models used to forecast the equity risk premium, and I've seen a couple of papers that had questionable methods. For example, this paper by Javier Estrada goes into ...
2
votes
2answers
624 views

Squared and Absolute Returns

I've always wondered why do one use squared or absolute returns to determine if volatility modeling is required for the return series? We understand that there are various tests for its ...
2
votes
1answer
142 views

Good reference on sample autocorrelation?

I'm not a statistician but I'm writing my thesis on mathematical finance and I think it would be neat to have a short section about independence of stock returns. I need to get better understanding ...
6
votes
1answer
446 views

Are shorter holding period strategies better?

Consider two statistically identical strategies (identical information ratios, sample size, ratio of transaction costs to total profit, etc.) except that one has a much shorter average holding period. ...
7
votes
1answer
3k views

Time Series Regression with Overlapping Data

I am seeing a regression model which is regressing Year-on-Year stock index returns on lagged (12 months) Year-on-Year returns of the same stock index, credit spread (difference between monthly mean ...