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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13
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4answers
653 views

Is R being replaced by Python at quant desks?

I know the title sounds a little extreme but I wonder whether R is phased out by a lot of quant desks at sell side banks as well as hedge funds in favor of Python. I get the impression that with ...
1
vote
1answer
31 views

How to identify the orders p and q for ARIMA model using least squares method?

I would like to identify the orders p and q for ARIMA model using least squares method in Matlab. I have got also two data files (one with noise and one without) Previously I identified p and q for ...
-1
votes
1answer
32 views

Calculating or finding info about the value of a market? for example Cloud Storage [on hold]

I am assembling a pitch which will aim towards investors by the end of this year/beginning of next year, and I need to gather information such as how much the Cloud Storage market is worth and how ...
3
votes
0answers
33 views

How to calculate the JdK RS-Ratio

Anyone have a clue how to calculate the JdK RS-Ratio? Let's say I want to compare the Relative strength for these: EWA iShares MSCI Australia Index Fund EWC iShares MSCI Canada Index Fund EWD ...
3
votes
1answer
89 views

Fitting transition matrices in R by solving for coefficient

I'm using various matrices to impute a fitted transition matrix for credit ratings by solving for a variable [S]. Essentially the idea is to determine a base matrix and stress matrix to compare to a ...
3
votes
3answers
133 views

References on Statistical Arbitrages

Is there any basic materials (books, papers) to read on Statistical Arbitrage? I certainly understand much of the useful information is in the industry. I just want to get some understanding on the ...
2
votes
1answer
120 views

Kolmogorov-Smirnov test for Generalized Pareto Distribution

I've fitted my data to a generalized pareto distribution as to model the returns in the tails more accurately. The interior is fitted with kernel distributions. I would like to now test whether the ...
3
votes
1answer
101 views

Covariance structure of call option surface

Assume the observed call option prices $C(K_i,T_i)$ for $i = 1,\dots,N$ are disturbed by some unknown measurement noise $\epsilon$. What would an appropriate covariance structure be for $\epsilon$? ...
0
votes
0answers
15 views

Value of sequential mutually-exclusive options (A variant on the Secretary Problem)

How much should you offer a potential hire in a signing bonus? Imagine you are interviewing a list of candidates for a particular job. Each candidate has a "lifetime value", and probability of ...
2
votes
1answer
95 views

rollapply with Arima model: testing for stability of coefficients

I am trying to fit an arima model on a rolling window using rollapply.My aim is to plot a graph of the evolution of the coefficient, plot the error and the standard deviation. well i encountered the ...
0
votes
0answers
29 views

Interpreting Johansen co integration test

I am a little new to econometrics. Please pardon me for this silly question. I was running a Johansen cointegration test on two time series using the econometrics toolbox provided by James LeSage for ...
11
votes
7answers
6k views

Should I use an arithmetic or a geometric calculation for the Sharpe Ratio?

What are the advantages/disadvantages of using the arithmetic Sharpe Ratio vs the geometric Sharpe Ratio? Is one more correct? Or is one better in certain circumstances?
0
votes
0answers
67 views

Create Markets Bubble Indicator

I am trying to replicate a Bubble Indicator described here. The indicator is strictly based on calculating the regularity of price behavior to determine herding in multiple time frames. I tried the ...
2
votes
1answer
80 views

How to account for correlation between strategies when they are added linearly?

There are n strategies which are going to be combined linearly. Using a pre-exisiting model I get a set of n weights which will be used to combine the strategies. But the model does not take ...
1
vote
1answer
139 views

using garch to forecast volatility but getting low persistence model

I am using a GARCH(1, 1) model to try model volatility for a certain stock. I have a GARCH function in matlab that returns the three parameters, omega, alpha & beta. I then use this parameters ...
2
votes
3answers
150 views

Dou you have an example of implementing Engle-Granger 2-step cointegration?

Does anyone know where to find an example of implementing Engle-Granger 2-step cointegration? Python's ideal, but any language will do. I've skimmed and read many articles, but understand little ...
1
vote
1answer
104 views

To lump or not to lump

Suppose I have a very simple asset whose price takes only three possible values: $X_t\in \{-1,0,1\}$. I also got some discrete time series $X = (X_t)_{t\geq 0}$ and I would like to come up with a ...
1
vote
1answer
65 views

What is an appropriate algorithm to use for tax loss harvesting?

I've been reading into how Betterment and Wealthfront have architected their tax loss harvesting algorithms, but they stop short of providing any real examples. Essentially, they both reduce to: ...
2
votes
0answers
24 views

What methods - inspired by Haavelmo’s Structural Econometrics - can show that a partial equilibrium model is unreliable? [closed]

According to Spanos 2014 Revisiting Haavelmo's Structural econometrics: Bridging the gap between theory and data Dynamic Stochastic General Equilibrium models are statistically inadequate, in such an ...
0
votes
0answers
20 views

Standardized Abnormal Returns

I have a question. In an event study, I have found a standardized cumulative abnormal return Z test formula. It is attached. I couldn't find any sources to prove it. Do you know any articles about ...
7
votes
3answers
3k views

Can the Hurst exponent be greater than one?

Can the Hurst exponent be greater than one? Does it mean that the time series follows a random walk or that it's not stationary?
5
votes
3answers
11k 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 ...
2
votes
1answer
77 views

Law of large numbers necessary for APT derivation?

The question refers to the well-known Ross (1976) paper with the derivation of the Asset Pricing Theory. In the APT, the return of asset $i$ is driven by a linear factor model: $$ R_i = \alpha_i + ...
3
votes
1answer
164 views

Bayesian or Frequentist in Finance?

I'm currently an undergrad at a Canadian university and our finance courses has been brought up through the frequentist approach (ols, hypothesis testing, sampling theory). Only recently, through ...
-1
votes
1answer
59 views

Probability distribution and Stock Price Movement [closed]

How can we use normal distribution for finding the probability of a stock price offer where current price offer depends upon the last price offer. The price offer on some day can go 10% above (at the ...
2
votes
1answer
208 views

Stress Testing Methods

I'm working on the following task: Given quarterly data: a time series representing the 1-year realized (10 years of data) rates of default on a portfolio of mortgages a slew of ...
1
vote
3answers
8k 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
votes
0answers
23 views

How to calculate the standard deviation of a 'deviation from a moving average'?

Say I have a vector of daily price changes for an asset and calculate the standard deviation of returns in the usual way. Let's call this result A. Now assume that for the same asset I also have a ...
6
votes
4answers
262 views

What are the canonical books for statistics applied to finance?

I have some decent knowledge of probability, stochastic processes and option theory, however I do not have a proper background in statistics. Now I am working quite a lot with data, and trying ...
0
votes
0answers
79 views

Interpretation of Cointegration results, pValues and t-Stat

This is a follow up to: Cointegration results interpretation validation? I ran another Engel Granger Test on a pair, The results I get: ...
15
votes
6answers
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 ...
4
votes
3answers
238 views
1
vote
0answers
161 views

What machine learning method is more suitable for prediction of financial time series? [closed]

I have some time series from a stock exchange market. For each of them, I want to answer the question that whether the price will grow at least p percent in the d coming days or NOT(and during these ...
2
votes
0answers
59 views

seasonality and generalized additive model

I am reading a report which talks about seasonality. There is a chart showing the average returns for each month of the year. In the chart it appears the last 3 months of the year tend to be negative. ...
1
vote
1answer
160 views

detecting and measuring lead lag effect

Given two time series data. I remember there is one statistics that tells you one is the leading factor while the other is the lagging factor. However, i do not remember the exact details. correlation ...
4
votes
1answer
171 views

factor models and using cross section regression

I have been doing some reading on factor models. In the literature it mentions that when creating a portfolio that maximises particular attributes it may lead to unwanted bias to other factors. I ...
8
votes
3answers
1k views

Hidden Markov Model & Its Application

I have started reading about HMM it gives an intuitive idea about what HMM is all about. I am looking out for example where its applied to Equity model using R / Excel. The material which I read so ...
2
votes
2answers
169 views

Predict Futures Prices based on weather + agricultural data

I’m working in the area of Data Mining and have come up with the following idea for my Masters project.The text may not be the best structured but it’s a working draft to give you a quick idea. ...
2
votes
2answers
61 views

Is this a reasonable approach to determine the relative importance of valuation factors?

I am trying to come up with a measure of relative importance of a number of valuation factors. I am wondering whether correlation coefficients can't be used for determining this. More on the issue: ...
1
vote
2answers
145 views

How to combine Gaussian marginals with Gaussian copula to obtain multivariate normals?

in the book "Numerical Methods and Optimization in Finance" I red the following: "Combining the Gaussian copula with Gaussian marginal gives a fancy way of expressing multivariate normals. However, ...
3
votes
3answers
360 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
votes
0answers
96 views

State Space models with Short Time Series

My problem is that I have a state space model that I estimate using the Berndt–Hall–Hall–Hausman (BHHH) algorithm. The state space model is relatively simple in that the hidden part follows a pure ...
1
vote
0answers
41 views

How to value a portfolio of non-mature consumer loans?

I'm looking for the best way to value a portfolio of consumer loans that have NOT reached maturity and for which I do observe the payment/default history to date? I'm working with a large database of ...
1
vote
0answers
179 views

Autoregressive distributed lag models ADL(p,q) howto in preferably matlab (stata/R/python/C# etc)

Could anyone provide me the details of how to determine the lag order of the distributed lags for an ADL(p,q) model in Matlab or another statistical package (and very much preferably in combination ...
0
votes
1answer
164 views

Book recommendation for time series analysis

I have been trying to wrap my head around Engel-Granger test and jcitest etc. I have failed thus far. If possible can someone guide me about which books to start with and possibly reach to ...
3
votes
1answer
81 views

Properties of a Symmetric Copula

I am working with the following copula, and have a few questions about it: $C(x,y) = xy + \theta (1-x)(1-y)xy$ Here $\theta \in [-1,1]$ and $x,y \in [0,1]$ First, I am trying to show this copula is ...
6
votes
2answers
309 views

Why are we obsessed over normalizing financial data?

I have recently began work on some high frequency financial tick data. I have been told to 'normalize' the data as much as possible and run linear regressions through them. In fact, the data doesn't ...
2
votes
2answers
161 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 ...
0
votes
2answers
171 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 ...
6
votes
2answers
425 views

Efficiency vs. Robustness - To use a constant or not in single factor time-series regression?

Arbitrage pricing theory states that expected returns for a security are linear combination of exposures to risk factors and the returns on these risk factors. Betas, or the exposures of the security ...