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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25
votes
6answers
8k views

How are correlation and cointegration related?

In what ways (and under what circumstances) are correlation and cointegration related, if at all? One difference is that one usually thinks of correlation in terms of returns and cointegration in ...
12
votes
4answers
2k views

Are two identical time series cointegrated?

I did cointegration test on two identical time series, and the result shows that they are not cointegrated, but intuitively, I think they are. Can anyone share some thoughts on this? Thanks!
6
votes
1answer
1k views

How do I reproduce the cross-sectional regression in “Intraday Patterns in the Cross-section of Stock Returns”?

Recently I was trying to reproduce the results of "Intraday Patterns in the Cross-section of Stock Returns". The authors used cross-sectional regression to determine which intraday lags have ...
17
votes
2answers
655 views

How do you correct Max Draw-Down for auto-correlation?

When returns are auto-correlated, calculating a Sharpe ratio := $\frac {mean(x)}{\sqrt{var(x)}}$, (where $x$ are the returns) is complicated, but basically solved (see, e.g. Lo (2005)). Without the ...
14
votes
5answers
5k views

What is the intuition behind cointegration?

What is the intuition behind cointegration? What does the Dickey-Fuller test do to test for it? Ideally, a non-technical explanation would be appreciated. Say you need to explain it to an investor ...
7
votes
2answers
332 views
12
votes
4answers
2k views

How do you evaluate a covariance forecast?

Suppose you have two sources of covariance forecasts on a fixed set of $n$ assets, method A and method B (you can think of them as black box forecasts, from two vendors, say), which are known to be ...