Timeline for Proof that you cannot beat a random walk
Current License: CC BY-SA 3.0
14 events
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| S Feb 27, 2012 at 4:43 | history | suggested | hhh | CC BY-SA 3.0 |
...made it more visually pleasing, please, peer-review... it is still hard-reading -- haven't verified it
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| Feb 27, 2012 at 1:42 | review | Suggested edits | |||
| S Feb 27, 2012 at 4:43 | |||||
| Feb 18, 2012 at 7:55 | history | edited | 楊祝昇 | CC BY-SA 3.0 |
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| Feb 18, 2012 at 4:37 | comment | added | 楊祝昇 | ＠hhh, Nobody here tried to beat real financial data. Vonjd was asking whether we can/can't beat the 'random walk', not the 'real world', in the way he wants. We are indeed aware of the difference between RW and real world, but thanks for reminding us. :) | |
| Dec 8, 2011 at 9:09 | comment | added | hhh | there is at least one hole in this answer, how do you know that financial valuations are really dependent on the past, not on the last stage (Markov assumption) or perhaps something else? I agree that you can beat RW with arbitrary assumptions but are you sure about your premise here about the historical dependency? | |
| Aug 24, 2011 at 9:13 | comment | added | 楊祝昇 | Second, there is no contradiction to the common sense that 'pure independence = zero E[PnL]'. E[] > 0 in my example and your Parrondo's paradox is indeed exploited from sort of dependency. While Parrondo exploits the dependency between two losing games, mine is exploiting the dependency on my losing trades (which is less obvious). But (warn again), this is at cost of ruin risk! Note that Kelly/Vol-pump eliminate ruin risk, but still suffer tail risk. Conclusion? Find dependency had better, create it if you must. | |
| Aug 24, 2011 at 8:29 | comment | added | 楊祝昇 | Thank you for accepting the answer, vonjd. I also like the analogy you found in Parrondo paradox. Though not sure how to answer your questions? here is my attempt: First, all mentioned strategies propose to add(cut) risk exposure when lose(win). For example, if you long stock and you lose/gain 1 dollar when market moves, kelly or vol-pump will require you buy/sell in order to maintain constant betting ratio. This makes volatility your friend (pumping). But trend is your enemy! In this case, is random walk more like your enemy or your friend? | |
| Aug 23, 2011 at 5:43 | vote | accept | vonjd | ||
| Aug 22, 2011 at 7:43 | comment | added | vonjd | Thank you - how does this square with "constant rebalancing"? Is this the same as "volatility pumping"? Could you show a more direct connection between your first proof and the other concepts that seem to use some kind of "Parrondo's paradox"? Thank you again. | |
| Aug 22, 2011 at 0:24 | history | edited | 楊祝昇 | CC BY-SA 3.0 |
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| Aug 20, 2011 at 3:02 | history | edited | 楊祝昇 | CC BY-SA 3.0 |
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| Aug 20, 2011 at 2:43 | history | edited | 楊祝昇 | CC BY-SA 3.0 |
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| Aug 19, 2011 at 22:21 | history | edited | 楊祝昇 | CC BY-SA 3.0 |
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| Aug 19, 2011 at 21:47 | history | answered | 楊祝昇 | CC BY-SA 3.0 |