I am learning a lot of tools in statistics, but I am having a hard time figuring out where I could apply these methods in finance, especially in relation to investment and trading.

Is there a good book/blog where they give some real world examples as to where someone actually used statistical methods, built a strategy, and implemented it? I'm not looking for strategies that work, just the thought process behind it. Or just how to use the analysis. Or some examples of real world models.

For example, even if we use a simple GARCH model to produce a volatility figure, what do we do with that volatility figure? How do people in the industry use that volatility figure. Seems too simple to assume that tomorrow's volatility can be predicted by todays/yesterday's volatility model, even though yes, empirically volatility clusters.

  • $\begingroup$ My two cents: Start with a market that is interesting to you (such as S&P500). Ask some simple questions (for example: is the return the same on every day of the week?. Use appropriate statistical tools and data to investigate the question. Also read published papers (SSRN) and try to reproduce/improve the results. Do NOT start with techniques (such as GJR_GARCH) and ask where in Finance can this be applied. Start from research issues (yours or other ppl) and draw (or build on) your stats knowledge as needed. $\endgroup$ – noob2 Oct 18 '19 at 16:55