New answers tagged trading
I'm not really sure what your question is, you appear to answer it yourself... If I'm understanding you correctly you are making 2 transactions at 0.6% cost, so then your profit = pred * d_price - pred*(trans) - pred/(1+d_price)*trans That is just your raw profit minus your transaction costs at your opening and closing prices
first: if he should regress returns then this is actually what he is doing since $ln(p_t)$ is equal to $r_t$ almost surely then, you put just prices to regression equation and coefficients tell you exactly what proportions are making this linear combination stationary, if they are : p
As I explained in this post, PCA is a dimension reduction method. There is no way to use it to determine intrinsic values of a stock, and hence it is not used directly for trading...
To answer your questions we have to take a look to what it does. PCA is mathematically defined as an orthogonal linear transformation that transforms the data to a new coordinate system, such that news vectors are orthogonals and explain the main part of the variance of the first set. It took an N x M matrice as input, N represents the differents ...
Your first definition is wrong; I'm not sure where you got that from. Your second definition is correct: the ISO alerts the exchange that the submitting party has taken responsibility for RegNMS and requests a fill at only that venue's price; there is no routing away. Obviously, there is a huge red-tape burden to get permission to do this.
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