A message from our CEO about the future of Stack Overflow and Stack Exchange. Read now.

# Questions tagged [random-walk]

The tag has no usage guidance.

57 questions
Filter by
Sorted by
Tagged with
243 views

### Forget Kelly, forget fractional sizing. Where is the general theory?

I am struggling to find a general theory of position sizing. Help! The literature is all about fractional position sizing, but that's just one of the innumerable strategies. What about all the other ...
39 views

### Accumulation Rate of Variance in Random Walk

I am slightly confused with the terminology Shreve (2008), he states: "The variance of the symmetric random walk accumulates at rate one per unit time, so that the variance of the increment over ...
70 views

### some doubts about answers to ticket line question from interview book

I'm reading an interview book called A Practical Guide to Quantitative Finance Interviews (nickname: Greenbook) and cannot understand the answer to the following question: Question: From Chapter 5/5....
95 views

### Why are changes in stock market wealth considered permanent?

Assume stock prices follow a random walk. If my investments go up by 1,000 dollars on the stock market today and I keep that money invested, in expectation, how much are my investments worth 1 year ...
69 views

### Cannot Understand The Ticket Line Question From Interview Book

I'm reading an interview book called A Practical Guide to Quantitative Finance Interviews (nickname: Greenbook) and cannot understand the following question(the question itself instead of its answers):...
193 views

### Determining if a time series is random

I originally posted this in the Data Science Stack Exchange. Another poster suggested I post it here. The idea would be to identify "orderly" segments within a market time series and use them to ...
64 views

### How to estimate the probability of Clustering illusion in our backtest result?

Suppose I have a strategy, I run a backtest on it in only one symbol (suppose the historic data to backtest is 25000 candles). The results of that backtest is: Total Trades = 50 TakeProfit/...
107 views

35 views

### Identity given in Shreve volume 1

in a solution to a question about random walks (5.3 i), Part of the answer includes the identity: $$\ln \frac{1+\sqrt{1-4 pq}}{2p}=\ln\frac{1-p}{p}$$ note that $p+q=1$ and $0<p<1/2<q<1$. ...
180 views

### Correlated Random Number Generation using Sobol?

There is a clear theory about generating correlated random numbers using Cholesky decomposition or PCA. I suppose if we apply above methods to random numbers generated using Uniform random numbers ...
1k views

### How is stock data objectively different to this random walk?

I have a random walk that is generated as so using python, numpy, and matplotlib ...
371 views

### How come the existence of ARCH effect is not a violation of Random Walk Hypothesis 3?

An ARCH (autoregressive conditional heteroscedastic) (1) model is: $r_t=\mu +a_t$, where $a_t=$return residual, and $\mu$ is the drift of the stock return $a_t=\sigma_t\epsilon_t$, where $\sigma_t=$...
40 views

3k views

### How to apply Ljung Box Test?

I am checking the closing prices(about 9000+ prices) of the stocks data to test for randomness. The test I am using is Ljung Box test, in MFE toolbox for MATLAB, I used 300 data of closing prices, ...
1k views

### Is creating constrained random portfolios a hard problem?

Creating random portfolios with weights $x_i$ can be thought of as sampling from the surface of a simplex given by $$Ex = f$$ and $$Ax \le b$$ Where $E$ and $A$ are constraint matrices for equality ...
130 views

### Optimal mortgage rate strategy

When buying a mortgage, you can choose to "lock in" a rate at any point within 60 days of your closing date. Once locked in, you can't revert. This makes it a secretary problem - in the traditional ...
195 views

### Is it random walk?

I would like to ask a question about random walk. Campbell, Lo & Mackinlay defined the random walk, in the following way (RW3): $$cov[f(r_{t}),g(r_{t+k})]=0,\qquad k\neq0$$ for all $f(\cdot)$ ...
561 views

### Probability of trade's exit orders being triggered in random-walk market

When placing a trade with Stop Loss and Take Profit orders in a hypothetical random market (i.e. 0.5 probability of up tick and 0.5 probability of down tick), assuming: x is the distance in ticks of ...
601 views

### Coin Toss System

Coin Toss Runs Calculator The expected number of runs for two consecutive heads or tails is 3. Is there an edge if we place a progressive constant size bet(limited to 3 times)for consecutive ...