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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4
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1answer
149 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
117 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
129 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 $\epsilon$? ...
1
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1answer
26 views

market change, correlation and estimation bias

I hear many quants sating that markets change very slowly. This "fact" is even presented as a justification of statistical arbitrage, for example, by affirming that correlations remain roughly the ...
6
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0answers
171 views

Proving the asymptotic distribution of Manipulation-Proof Performance Measure (MPPM) (Paper by Goetzmann et al.)

In Goetzmann et al.'s (2007) paper, the authors derive a "Manipulation-Proof Performance Measure" (MPPM), which is a performance measure that is impervious to performance manipulation by fund ...
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0answers
340 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. ...
4
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0answers
496 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: ...
4
votes
0answers
543 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
161 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
477 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
0answers
165 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
272 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 ...
3
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0answers
204 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
219 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
votes
0answers
64 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. ...
2
votes
0answers
100 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 ...
2
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0answers
135 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
votes
0answers
543 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 ...
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vote
0answers
12 views

How do I calculate what % of price hits R1 before pivot

I am trying to calculate what % of times the price touches R1 before the pivot level. I have the data for the last 10 years and know how often it touches the R1 one and pivot point but I don't know ...
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0answers
34 views

ISM PMI data - sector trend through ranking and seasonal decomposition

I have monthly data for each of the 18 sectors in the ISM PMI. Each datapoint shows the trend of a sector: growing, contracting or neutral. It also tells the strength of that trend with a number: ...
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0answers
43 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 ...
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0answers
213 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 ...
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0answers
74 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 $X_t$ ...
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0answers
31 views

How to construct a cointegrating vector using more than 2 price series in R?

I use now this code from hier Why does the following data fail my cointegration test? with slightly modification of possibility to load something directly from Dropbox file storage . ...
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0answers
32 views

Can you tell me what this RBloomberg formula means?

I've been asked to re-create a spreadsheet that used RBloomberg using a different data source. But I'm having trouble figuring out exactly what one of the spreadsheet's formulas does. Can anyone tell ...
0
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0answers
17 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 ...
0
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0answers
43 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 ...
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0answers
83 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 ...
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0answers
28 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 ...
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0answers
27 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 ...
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0answers
92 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: ...
0
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0answers
259 views

Simple EOD computations for tick data

As part of End-Of-Day calculations once a particular market/exchange has closed for all the tickers traded on that market one may typically compute the following properties: OHLC Bid/Ask Price ...