The study of the collection, organization, analysis, and interpretation of data. Questions may deal with descriptive statistics, probability distributions, random variables, sampling, regression, density estimation, filtering, inference, estimation theory, or computational statistics.

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2answers
794 views

How to make the final Interpretation of PCA?

I have question regarding final loading of data back to original variables. So for example: I have 10 variable from a,b,c....j using returns for last 300 days i got return matrix of 300 X 10. ...
4
votes
1answer
463 views

Coin Toss System

Coin Toss Runs Calculator The expected number of runs for two consecutive heads or tails is 3. Is there an edge if we place a progressive constant size bet(limited to 3 times)for consecutive ...
4
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0answers
257 views

Asymmetric Volatility Modeling (Interpretation)

I am currently writing a paper on asymmetric volatility modeling of brent, gold, silver, wheat, soybean and corn from 1986-2012 and divided them into 4 sub-sample periods (i.e. 1986-1991, 1991-1997, ...
4
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0answers
147 views

Is it more accurate to analyze returns on a calendar day basis than a trading day basis?

I'm rather new to the actual practice of this kind of analysis, but it just seems wrong to me to throw Mondays' returns in with the rest without accounting for the passage of time on the weekend when ...
4
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0answers
375 views

ATM volatility versus OTM volatility and directional standard deviation

The forward instrument vol curve is skewed to the downside (50 delta risk reversal, 25 put, 25 call) were trading several ticks to the put). Is there a smaller standard deviation (in price terms) to ...
3
votes
2answers
5k views

How to fit ARMA+GARCH Model In R?

I am currently working on ARMA+GARCH model using R. I am looking out for example which explain step by step explanation for fitting this model in R. I have time series which is stationary and I am ...
3
votes
1answer
153 views

Statistical Power and Active Management

I was reading an article recently that pointed out the dangers of using statistical inference in evaluating active managers as the power of statistical tests diminishes with the variance of the ...
3
votes
3answers
170 views

How to see if a set of asset returns corresponds to a known correlation matrix?

Let's say I have an arbitrary set of $n$ period returns for $k$ assets, and a given $k \times k$ correlation matrix (of asset returns), which is known a priori. Does it makes sense, or is it even ...
3
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0answers
138 views

Should I use Resampling or Expectation Maximization to compute a robust covariance matrix?

I have several assets, each with different return histories. Some of the assets have 75 days of return history, others have 40 or so days. In calculating a robust covariance matrix, should I be using ...
3
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0answers
387 views

How to determine ratios for mean-reverting basket

Suppose I have a basket of 3 securities A, B, and C. I believe that the basket is cointegrated and I want to create a mean-reverting trade. I fit the model: ...
3
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0answers
170 views

Fitting a non linear AR + GARCH(1,1)-M model

I want to fit the following model to a time series: $$ y_{t}=\alpha_{0}+\alpha_{1}y_{t-1}+\alpha_{2}y_{t-1}^{2}+\lambda h_{t}+\varepsilon_{t} $$ $$ ...
3
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0answers
199 views

how to represent financial data as a spatial process

Does any one have a good tutorial , introduction or overview on the web for different ways of representing financial data as a spatial process? Such as those spatial processes often used in ...
2
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3answers
1k views

What advanced statistical techniques are quant researchers using? [closed]

Some time ago I was talking to a representative of one of the leading quantitative hedge funds. We talked about recruitment and the following had me stunned: The representative explained that they ...
2
votes
2answers
462 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
2answers
2k views

Calculating Portfolio Skewness & Kurtosis

I need to calculate the skewness and kurtosis of 2 asset portfolio, can someone please help me with the formulas and definition of terms? Thank you. I have been using the matrices method and I am not ...
2
votes
2answers
394 views

.NET statistical packages recommendation

What open source or commercial .NET statistical package would you guys recommend? I am doing statistical arbitrage in options. The functions I need mainly are regressions, optimizations..etc. It would ...
2
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2answers
658 views

Detrending price data for analysis of signal returns

I'm looking to conduct hypothesis tests on some of my trading signals to see if the signal returns are statistically significant enough to falsify my null hypothesis that the signal has no predictive ...
2
votes
1answer
73 views

Summary statistic for the average probability of default?

I have the following scenario: Let $X_i$ denote the event where some institution $i$ 'defaults' (don't worry about the exact definition of a default here, it is not relevant to the question at hand). ...
2
votes
2answers
2k views

What do the terms in-sample and out-of-sample estimates mean in MVO?

How do the in-sample estimates and out-of-sample estimates I so often hear authors refer to in emperical analysis of MVO differ?
2
votes
1answer
2k views

Hurst Exponent Calculation

I am trying to calculate the Hurst Exponent using Excel. I am facing a problem where the exponent value sometime goes beyond 1. Can someone share a link / material so that it will help me to calculate ...
2
votes
1answer
111 views

How to compare different volatility measures?

I read the Euan Sinclair's book (Volatility trading) in which he suggests different volatility estimators (Close-to-close, Parkinson, Garman-Klass, ...). I am inquiring about what is the best stock ...
2
votes
1answer
96 views

a good book on option pricing from theoretical and practical aspect [duplicate]

This is the situation someone I know is in: She has good understandings of stochastic calculus and the very basics about black-scholes and binomial model, but nothing more. Her background is in ...
2
votes
1answer
104 views

Are my estimates of parameters of geometric brownian motion correct?

I wrote a simulation of a geometric Brownian motion which works like this: ${ t }_{ i }-{ t }_{ i-1 } \sim Exp(\lambda )$ ${ Z }_{ i }\sim N(0,1)$ ${ Y }_{ i }\sim { e }^{ \sigma \sqrt { { t }_{ i ...
2
votes
1answer
370 views

Monte Carlo Options Probability Calculation

I have a fairly simple problem for an application I am writing currently. How do you calculate the options probability of being in the money or touching a certain strike price. I know there are at ...
2
votes
1answer
544 views

Predict Quadratic Trend in Time Series

Can anyone kindly point out if I made any mistakes in making predictions using quadratic regression model in time series? I called the predict() function with the appropriate data vector and model, ...
2
votes
1answer
119 views

How to reconstruct a discontinued economic time series such as the Fed's CP rate?

The old 3-Month Commercial Paper Rate (CP3M) on FRED was discontinued in 1997. I would like to reconstruct this series in a reasonable fashion, so I can use it to analyze more recent events. I was ...
2
votes
2answers
162 views

Measuring historical earnings surprises, their frequency and severity

This is my first post to Quantitative Finance, so I hope my question is formatted the right way. I am starting to research the effects of earnings surprises on certain equity indices. Is there a ...
2
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0answers
95 views

Correlation between idiosyncratic residuals and forward returns

The classic mean-reversion strategy is to calculate an "expected return" (alpha) by computing the raw return for each security and then remove the part which you think is market driven. Statistically ...
2
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0answers
238 views

Is this methodology to calculate Alpha using multi-factor regression model correct?

I am trying to find out Historical Alphas of a bunch of fund returns ${F_i}$ by Using Regression Model$(stepwise)$ with regressors as its underlying exposure-returns(risk-free rate subtracted) i.e. ...
2
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0answers
213 views

Market risk stress testing?

I am doing a research for a paper for market risk stress testing. In fact I found some information on the web about this important topic such as: Stress Testing from Art to Science Stress Testing ...
2
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0answers
374 views

Does the geometric Ornstein-Uhlenbeck process have stationary variance?

I know that the long run variance of the standard OU process is $\lim_{s\rightarrow \infty}\mbox{Var}(P_{t+s}|P_t) = \frac{\sigma^2}{2\theta}$ I'm using the geometric version of the process. I ...
2
votes
0answers
122 views

What are the proper metrics to look at for checking discrepancies in these two time series

I am obtaining bid/ask price and volume market data from two different sources for the same ticker and for the same day and checking to see that at time intervals X they are "roughly the same". The ...
1
vote
2answers
152 views

Estimate weekly, yearly quantities from finite samples

I'd like to estimate from a daily prices serie $P_t$ with $N$ observations a quantity such as the variance of the weekly returns. I will use $\ln\left(\frac{P_{T+5}}{P_T}\right)$ assuming 5 days in a ...
1
vote
3answers
344 views

Kolmogorov-Smirnov test

Is Kolmogorov-Smirnov test self-sufficient to prove normal distribution of a time series? And then test efficiency of a market?
1
vote
2answers
425 views

Partial Least Squares Discriminant Analysis

Could anyone point me to detailed literature about "Partial Least Squares Discriminant Analysis"? Intuition, methodology and examples.. Thanks,
1
vote
2answers
142 views

Statistics of difference between two GBMs

if I have two asset prices modeled separately as geometric brownian motions. How do i go about calculating the expected statistics of their difference? Like given the sigmas and mus of both processes, ...
1
vote
1answer
355 views

Testing Significance of Correlation

Lets say I have the returns of two stocks(stock1 and stock2). Now without running a regression, I lag one of the variables, calculate the correlation between the two stocks and repeat this process as ...
1
vote
1answer
189 views

Probability of a return from historical average and standard deviation

I have a question from a sample exam paper that I'm having some trouble figuring out. The question is: Bavarian Sausage stock has an average historical return of 16.3% and a standard deviation of ...
0
votes
2answers
5k views

Kalman Filter Equity Example

I am looking out for some material where I can study about Kalman Filter applied to Equity using Excel or R?
0
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3answers
245 views

Profit estimation with a dice: 10 dollars for 6, -1 dollar for anything else

I recently found the following question: What is your profit estimate throwing a dice in the long run if you get 10 dollars for each time you hit 6 and lose 1 dollar for any other number? I tried to ...
0
votes
1answer
97 views

Calculating company-level market capitalisations from share quantities and values

I want to calculate company-level market cap values for stock exchanges listed by Bloomberg. I gather this can be calculated as the product of share price and the total of shares in circulation. But ...
0
votes
1answer
101 views

Use of geometric mean for average return of several indices

Can anyone give any reference for using the geometric mean to average the returns from several indices? Note, this question is not about the usual use of geometric mean to obtain the average return ...
0
votes
2answers
158 views

Interpretation of PCs

I have computed PC1 and PC2 wts on future contracts derived from cumulative log differences. How can I use them to get back the theoretical price of each contract using those 2 pcs? Thanks in ...
0
votes
1answer
147 views

help me compare methods to compute one instrument price from another instrument price

Assume we have two instruments A and B. Also time is increasing from 1 to n. Let's say that ...
0
votes
1answer
97 views

Analyst Forecasts for monthly unemployment rate

Are there any resources that tabulate past analyst forecasts for the monthly unemployment rate along with the dispersion of the forecasts
0
votes
1answer
354 views

main arbitrage & statistical arbitrage concepts

can we please summarise here some of the basic concepts, tools used in arbitrage and statistical arbitrage in real life? ARB: benefit from price difference on same asset ARB: difference between ...
0
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0answers
52 views

Sampling and/or asymptotic distribution of a function

Assume we have the following function: $$f(p) = \frac{1}{(1-p)d}\ln\left(\frac{1}{T}\sum_{t=1}^{T}\left[\frac{1+X_t}{1+Y_t} \right]^{1-p} \right)$$ where $d$ is a constant $T$ is a constant $X_t$ ...
0
votes
1answer
86 views

Calculating the Sum of Squared Deviations between two Normalized Price Series

How can I calculate the sum of square deviations between two normalized price series according to (Gatev et. co 2006)? My normalized price series of stocks $X$ and $Y$ consist of the cumulative total ...
0
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0answers
21 views

definition of high frequency data [duplicate]

i would like to know what does mean high frequency data and low frequency data?there i could not find any basic definition of these two term,also it is very important to know what is meant by mean ...
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0answers
76 views

Penalize outlier values in time-series (Squaring, CoV)

I have set of log-return values. For this set need to calculate Coefficient of Variation with outlier values penalization. I'm just squaring all values to penalize outliers and there are different ...