Questions tagged [prediction]

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Predicting returns from historical data

Let's assume I have a matrix $R$ $(m$x$n)$ where I have the returns for $n$ stocks on $m$ consecutive days $d_1$, ..., $d_m$. I want to be able to build a predictive model for $d_{m+1}$. How could I ...
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1answer
66 views

Feature engineering for mid-price prediction - quickly changing features

I'm training a fully-connected feed-forward neural network on HFT (limit order book) data to predict the midprice at timepoint $t+\Delta t$ (assuming that $t$ is the current moment, and $\Delta t$ is ...
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3answers
84 views

Consistent offset/lag in time-series prediction using Neural Network (all code provided)

I'm using a neural network (keras package) to predict Bitcoin prices 48 hours in advance. The issue is that for some reason, my predictions are "correct" but they are lagging behind the true ...
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1answer
66 views

Reintegrating Fractionally Differentiated Time Series Prediction

I am working on a supervised learning approach to Time Series Regression, and am currently investigating fractionall differentiation (optimizing the stationarity/information tradeoff) discussed ...
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0answers
57 views

Garch models - are they useful for hedging? If so how?

I understand that Garch models are useful to predict volatility. But are they useful for hedging in practice? If I want to hedge volatility, why shouldn't I just use a Variance Swap? In other words, ...
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1answer
75 views

Predict Log Stock Return Direction and Trading Strategy

The $k$ period log return is defined as $$r_{t}(k)=log(S_{t}/S_{t-k}),$$ Where $S_{t}$ is the stock closing price at time $t$. For argument sake, assume that by time I mean a stock trading day and ...
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1answer
62 views

Is option surface same as future price probability surface?

Let's consider the Option Chain for the Stock. There are two 3D surfaces representing the probability of the future stock price and the option prices. I wonder if they are representing the same thing? ...
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18 views

Tradeoffs of using Loess regression to fit random walks

I am curious if anyone has had much experience attempting to predict random walks using Loess regression or a variant of local statistical methods.
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3answers
107 views

Does asset volume, rather than asset returns, predict performance?

Asset returns are the most common data type used in finance. They are derived from closing price data. Ordinary level 1 data for stocks not only consists of closing prices, but also gross volume ...
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1answer
24 views

Mutual fund rating predictions

I am working on a dataset with aim to predict the MF ratings. There are cols like, 10 yr, 7 yr, 5 yr etc returns. I also have commencement date of MFs, the question is there are MFs with commencements ...
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1answer
56 views

How to use multi-periods and mult-factors to predict stock price by linear regression?

Give data in $t_n$ denoted by $[x_1^n, x_2^n, ... x_d^n]$ and label $y_n$ to be predicted. We can just train a $d$-dimensional linear regression $y_n=\sum b_ix_i^n$ to make a prediction. However, I ...
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1answer
58 views

If a security has many options expiring on a day, can you predict its price direction?

r/wallstreetbets post alleges that because ~$1.9 Trillion USD of SPY call options expire on 3/20, the price of SPY will skyrocket on 3/20. Is this correct? What can be deduced? I'm not expecting to ...
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1answer
62 views

Predicting time series based on another

This is more of a generic question, but I'm sure it has a best answer/methodology which is what I'm trying to reach. I'm trying to figure out a solid line of thought when looking at a time series X ...
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1answer
36 views

Relationship between Data Size and Arima Prediction Interval Width?

When we use Arima model to acquire Interval Predictions, will the width of prediction intervals decrease if we use more data (longer history) to fit the model?
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2answers
46 views

Updated Time Series Prediction Model When acquiring new data Points - Basic Question

Suppose I have a Time Series Model (assume ARIMA) and use it to make one-step ahead prediction. If I acquire a new data point, (for example I was originally using the first 100 days to fit an Arima ...
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48 views

Replication of the paper: “A Comprehensive Look at the Empirical Performance of Equity Premium Prediction”

I recently replicated the paper "A Comprehensive Look at the Empirical Performance of Equity Premium Prediction" and found out that my estimation of the equity premium differs from the data provided ...
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1answer
131 views

Question is about the data in the paper: “A Comprehensive Look at The Empirical Performance of Equity Premium Prediction”

I would like to ask a question if you download the data from the Amit Goyal website: http://www.hec.unil.ch/agoyal/ You will see that there are two columns "CRSP_SPvw" "CRSP_SPvwx", they are ...
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1answer
123 views

Proper Data Partitioning For Building a Forecasting Model

Goal: A team and I are looking to build a model that performs a predictive action for the state of the market on day T + n, using the data at hand on day ...
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99 views

How to weigh computational cost of updating an online predictive model for latency-constrained trading (e.g., market making, HFT)?

Say one has a predictive online model for market making or HFT (or just for anything strictly latency-constrained). In my specific example, I start with a Gaussian distribution over the "true value" ...
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1answer
132 views

time series data modeling for deep learning

what is the best format to feed the input data, which are time series with varying density over time, to a deep learning network, while at any iteration we want to feed a batch of data including a ...
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0answers
28 views

Which technique determines if var x1 leads var y? Assuming var x1 may need to be transformed

Suppose I want to predict future changes in variable y (stock price over time). I notice that variable x1, inverted and delayed three months, tends to lead y. Which technique can I use to find other ...
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191 views

Beginner FFT (Fourier) transforms on closing prices for Apple

I don't know math very well, but I have been programming for many years. I would like to use FFT as a parameter to a ML model. The FFT is diving down sharply. I tried many stocks and its the same. ...
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43 views

Labeling Returns in 5 categories based on BL view approach

I have to label a time series of returns into 5 categories based on the Black Litterman view approach. The categories should look as follows: very bullish: + 2 std. dev. bullish: + 1 std. dev. ...
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0answers
98 views

Mean directional accuracy and zero

I'm trying to use mean directional accuracy to evaluate my directional predictions in back-test, but it can't deal with realised directions which are 0, due to the comparison of the signs of ...
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0answers
63 views

Predicting stock returns using principal components of macroeconomic variables

I'm trying to detect return predictability by regressing stock returns on the first couple of principal components of a set of macroeconomic variables. I'm doing this for different stock styles such ...
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4answers
269 views

Predicting portfolio returns

I suppose there are roughly two approaches to predict portfolio returns. Either predict the returns of all underlying stocks and aggregate all individual stock predictions, or predict the portfolio ...
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0answers
82 views

Can I make the simple moving average less lagging by this method?

I have (T+3) predicted prices for a stock. Let us assume that the predicted prices are going to be very close to the actual prices. can I alter the formula of simple moving average for 20 days like ...
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0answers
68 views

Why can the t-bill rate forecast stock returns?

The tbill rate is used as a predictor of the equity premium in a number of papers. Whilst there is not a general consensus about whether it is a significant predictor, it is still widely used. I ...
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2answers
183 views

Any research on label/target variable design for ML training?

is there any discussion or paper about how to define/design the labels for the ML training? Intuitively I can think of: Net return of the next future day Net return using the max candle-high value of ...
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1answer
178 views

Should there be a relation between stocks when used as input data for integrating Technical Analysis with Machine Learning?

I'm integrating Technical Analysis with Deep Learning for the first phase of my research. I wanted to know how should I pick (or group) stocks as input data and whether there should be relation ...
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2answers
376 views

Does predictability in a VAR process imply mean reversion or momentum?

There seems to be some disagreement in the literature about this. Define predicability of a stationary series to be $\sigma^2_{t-1} / \sigma^2_t$ Finding mean reverting portfolios using canonical ...
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0answers
212 views

Implementing Hanson`s LMSR with Limit Orderbooks

I am trying to integrate Hanson's LMSR (see (see logarithmic market scoring rule)into an order-book with traditional bid/ask-limit orders (in KDB+/Q). The following functions define the basic LMSR ...
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55 views

Trading Signals with Different Lags

I have a momentum signal that gives best predictive power at 3 months and a valuation signal that gives best predictive power at one year. If I combine for a 3 month horizon by "interpolating" the ...
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1answer
264 views

Are returns predictable, Campbell and Shiller (1988)

Following from the thread, Drivers of equity returns: dividend yield, change in P/E and dividend (or earnings) growth 1) Why are returns predictable from this, is there a reason? 2) Can we expect ...
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2answers
305 views

Working with time series with different resolutions

I’m looking at making predictions of close prices (stocks/commodities), and have access to various data sources to help predict. However, most of these sources are in a different time frame, ...
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1answer
217 views

how are financial data with sparse and asynchronous features imputed in predictive modeling?

I watched a presentation from a large quantitative finance firm that spends a lot of effort around predictive modeling. One of the points the presenter emphasized was that they deal with a lot of ...
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2answers
189 views

Fractal market hypothesis testing

I would like to do an analysis on the AEX stock exchange index for the last 20 years, but I ran into some issues. It would be really appreciated if you can answer my questions: In order to apply ...
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1answer
668 views

What is the stambaugh bias? Why is it important for predictability regressions?

What is the Stambaugh bias? Why is it important for predictability regressions? Can anyone explain it in simple terms?
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2answers
2k views

What is time-varying risk premium? Forecasting stock returns

I am trying to understand the concept 'Time-varying aggregate risk premium'. Here is an extract from a Forecasting book, written by Rapach and Zhou, "However, rational asset pricing theory posits ...
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1answer
169 views

Momentum Analysis on Indices

I'm interested in analysis of day-on-day momentum of certain large indices. In particular, I'm interested in the predictive power of the sign of the price change of the first hour of trading with ...
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1answer
396 views

Predict the behavior of a time series (P&L trading desk)

I work at the trading desk P&L department at a large bank. The trading desk has positions in almost all sorts of derivatives (options, futures) over a long list of stocks, currencies, commodities.....
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1answer
412 views

Predict probability of returns: How does changing volatility affect the return pdf?

I am trying to predict the future probability of stock returns based on the return distribution. Therefore I calculate the returns as $\frac{P(t)}{P(t-1)}$ for the whole daily data and fit a ...
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3answers
4k views

Determine trends of data (direction detection or turning point detection)

I'm working on a model to determine trends (direction detection or turning point detection). Suppose that we have a stock trend which is illustrated below. Blue line is real trend of stock close ...
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0answers
430 views

R squared statistic in predictions of returns

My question is related to an article which use predictive linear regression for the stock returns. There is told that R squared statistic of 1.6% is high. How can we measure which R squared is high? I ...
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0answers
307 views

Good books on predictive modeling (for alpha signal research)

In terms of books on predictive models, I find ESL (elements of statistical learning) trying to cover too much and serves more like a reference, instead of explaining and developing the theories for ...
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1answer
492 views

Trouble understanding lookahead bias

I understand lookahead bias is pretty common industry knowledge. But I cannot wrap my head around how I am introducing it and could use a nice and easy explanation. Here's my thought process. I have $...
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4answers
451 views

What is currently predictable in the stock and bond markets and what is not

Disclaimer: I have some knowledge of statistics, machine learning and probability theory, but next to zero knowledge of finance (I had to look up Wikipedia to refresh my knowledge of the difference ...
5
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1answer
309 views

Interpret predictions weekly and monthly stock price returns [closed]

I have built a model in R that predicts weekly and monthly returns of stock prices using regression trees, roughly based on https://www.r-bloggers.com/using-cart-for-stock-market-forecasting/. In my ...
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3answers
234 views

What is the better representative of a P-B ratio for a sector?

What is a better representative of a P-B ratio for a sector, for using it as a factor to predict future returns on that sector? The market weighted average of P-B for all names in that index, or ...
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2answers
98 views

What kind of indicators would you look in the market preceding a recession/crisis?

What kind of indicators may have predicted the upcoming financial crisis in the 2000 or 2008?