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As with many machine learning technologies, you can run a separate training and testing phase before deploying it live for prediction. All it does is build a collection of decision trees based on the parameters you give it - if the output field is a factor, you get classification (a finite enumerated set of values); if it's numeric, you get prediction. One ...


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I would argue that indeed none of the so-called stylized facts you mentioned can be explained by classical economic theory. That there was a gross delta between the predictions of classical economic theory and empirical data was foremost found out by Benoit Mandelbrot as far back as 1963 in his seminal paper: The Variation of Certain Speculative Prices In ...


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2) Alternative to Fama-MacBeth is Fama-French approach. Explanation of difference see, for example, here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1271935 Fama-French approach was used by Carhart (introduced momentum), Pastor-Stambaugh (introduced liquidity), Fama-French themselves (used it to build 5-factor model), and many other (elsevier or ...


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PX_BID and PX_ASK are the static equivalents of BID and ASK, the latter two of which populate in "real time" (i.e. as they are dynamically updated). So the PX_BID and PX_ASK values are dependent upon when you pulled the data. Bloomberg's source depends on the asset in question and the exchange on which they are listed, but the data does come from the ...


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The key assumption is that there is no time-series correlation between the error terms. Fama-MacBeth can deal with cross-sectional correlations. See Samuel Thompson's "Simple formulas for standard errors that cluster by both firm and time" in the Journal of Financial Economics (2011) for a treatment of different regression methods for testing equity ...


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I think there is a slight misconception into the purpose of an economic theory. The market is a complex entity to be modeled and yes, it is neither efficient nor arbitrage free but it is trading and there is a price process that corresponds to the market one. You could say that classical economic theory has failed, but I would argue the idea of a theory is ...


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Classical economics cannot "explain" volatility smiles, but neither does it preclude their existence. Economics is far more abstract than financial "quant"modeling and answers very different questions. In the more abstract framework of economics, volatility skew, mean reverting volatility, bubbles, and crashes are all conceivable scenarios. ...


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They represent the current BID and ASK at the time you query them. If you look up those fields in the terminal FLDS<GO> you will see they are marked as reference data, that means they are not continually updated. They are refreshed each time you query them. They come from the NBBO quote at the time you query them.


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Recently I found a book on earnings trading but did not have time to read thoroughly. Trading on Corporate Earnings News - John Shon I also had spent some time to see earnings surprise effects and it is a quite interesting but not easy to use topic. There is certainly a jump if the estimates and announced earnings have a large mismatch but the magnitude ...


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It could help with things like fraud detection, analysis of bankruptcy probability, default risk, unsupervised learning for qualitative/descriptive purposes, or for a purely backwards looking supervised analysis on returns again for descriptive/understanding purposes (variable important, etc, perhaps impulse response analysis). It may also be good at ...



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