Podcast #128: We chat with Kent C Dodds about why he loves React and discuss what life was like in the dark days before Git. Listen now.

# Questions tagged [statistics]

The study of the collection, organization, analysis, and interpretation of data. Questions may deal with descriptive statistics, probability distributions, random variables, sampling, regression, density estimation, filtering, inference, estimation theory, or computational statistics.

301 questions
Filter by
Sorted by
Tagged with
21 views

I am trying to solve the following problem: 'An insurance company has an initial surplus of 150 and premium loading factor of 15%. Assume that claims arrive according to a compound Poisson process $(... 0answers 12 views ### Fama/Macbeth Regression - negative estimate for market premium I just conducted a Fama-Macbeth regression to estimate the risk premia of Mkt-Rf, HML and SMB. As a result, I got a negative risk premium for Mkt-Rf which makes no sense in my opinion. As I couldn't ... 2answers 109 views ### When constructing a cointegrating series, does choosing the linear regression with the lowest ADF test statistic yield the optimal hedging ratio? Multiple sources say that you should find the optimal hedging ratio between two stocks in a pairs trade by conducting 2 linear regressions (with each stock as the independent variable), and using ... 3answers 6k views ### How to calculate the JdK RS-Ratio Anyone have a clue how to calculate the JdK RS-Ratio? Let's say I want to compare the Relative strength for these: EWA iShares MSCI Australia Index Fund EWC iShares MSCI Canada Index Fund EWD ... 0answers 63 views ### Why is R^2 negative on random data? [closed] The introductory book says R^2 is between 0 and 1, but I have two randomly generated sequences and the R^2 is negative. So I read further and now understand the negative value is because R^2 ... 1answer 47 views ### 0.0006 r-squared after trying to test whether the intercepts differ significantly. Did I do it wrong? I am trying to test if the intercepts of two linear regression (CAPM) differ significantly or not. I have 2 fund's monthly return in the same period and regress them on the same market variable (MKT = ... 2answers 9k views ### Annualzing the log of daily returns riddle Two popular ways to measure returns are Arithmetic returns and Log returns. Let's define arithmetic (simple period) returns as: P(t) - P(t-1) / P(t-1). Let's define log return as Ln( P(t)/P(t-1) ) or ... 0answers 39 views ### Correlation coefficient without cash flows? I'm an intern at a company and one of our tasks is to calculate the the probability of default of both participants of a Swap(a Client and a Bank), for which we first need the correlation coefficient ... 0answers 47 views ### William K. Bertram's sharpe formula checking I have some issues to verify by simulation the formulas in the paper of William K. Bertram "Analytic solutions for optimal statistical arbitrage trading". first, the reversion parameter alpha=180 in ... 2answers 72 views ### How to obtain annualized IR from t-monthly IC? When we checking the relation between some factors and Stock price, we could use Information Coefficient(IC) to meausre. And then I already have t-monthly IC for each factor, and I need to calculate ... 8answers 25k views ### Is R being replaced by Python at quant desks? I know the title sounds a little extreme but I wonder whether R is phased out by a lot of quant desks at sell side banks as well as hedge funds in favor of Python. I get the impression that with ... 1answer 122 views ### Average Return Differential Calculation - Newey West t-Statistic I am reading Table II on page 28 in Bali et al. (2007), Value at Risk and the Cross-Section of Hedge Fund Returns: Please can anyone explain the calculation of t-statistic and Newey West t-statistic ... 0answers 29 views ### Estimator for Conditional value at risk (average value at risk) I am following a book: Advanced Stochastic Models, Risk Assessment, and Portfolio Optimization by Svetlozar T. Rachev, Stoyan V. Stoyanov, Frank J. Fabozzi I'm learning about average value at risk. ... 1answer 51 views ### Adjust calculation of Sharpe ratio when portfolio is subjected to cash outflows I have a portfolio with cash and marketable securities, a benchmark, and a desire to calculate its Sharpe ratio. However, this portfolio has cash outflows. Sometimes securities are sold to produce the ... 1answer 52 views ### Backtesting model results, but backtesting output sampled at different frequency than model output So, I'm trying to backtest a model that computes P&L. This model pulls sensitivities on a weekly basis and applies market shocks to these sensitivities to project quarterly P&L. I want to ... 0answers 27 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 ... 2answers 83 views ### Do we need to assume underlying returns are normal in BSM model, given Central Limit Theorem? I am trying to get a better understanding of Central Limit Theorem and how it can be used in life and in finance. From what I have read, the BSM model assumes the underlying asset's simple returns ... 1answer 78 views ### How to apply derived beta to daily change? I've taken three months of price return data for two instruments and calculated a$\beta$between the two using the formula$\beta = \frac{Cov(x,y}{Var(y)}$with the goal of estimating what the ... 1answer 76 views ### Jensen’s Inequality for returns on short positions this is puzzling me. Say you have an asset A, that on day t+1 returns 1%, and then on day t+2 returns 1% again. If you invest$1 in A on day t (take a long position), then on day t+2 you have earned:...
137 views

I have a question regarding this particular post on quantstart: https://www.quantstart.com/articles/ARIMA-GARCH-Trading-Strategy-on-the-SP500-Stock-Market-Index-Using-R In it, he designs a day-...
69 views

### How to determine expected returns of an options portfolio?

Lets say I have a delta neutral portfolio, iron condors on spy for example. I'm short a call credit spread and a put credit credit spread of equal widths. I would like to determine the expected ...
83 views

### Barra model: why standardize the fundamental risk factors?

The two main types of risk factors included in the famous Barra model are called the "fundamental factors", and "industry factors," and the thing that I do not understand is why are only the former ...
18k views

### Should I use an arithmetic or a geometric calculation for the Sharpe Ratio?

What are the advantages/disadvantages of using the arithmetic Sharpe Ratio vs the geometric Sharpe Ratio? Is one more correct? Or is one better in certain circumstances?
56 views

### How to normalize stock exchange indexes

I am doing an academic research in behavioral finance and I need to calculate my abnormal return based on the normalized returns of the stock exchange index being the S&P 500. In other words, I ...
82 views

### Modeling mortgage loan defaults

I have a machine learning model trained with a list of mortgage features that include macro variables where the field to predict (the label) is "Mortgage Defaulted" = 1 or 0 (Yes or No). Now, I need ...
110 views

### How can stationary time series data be used as input in an ML model?

I am halfway through "Advances in Financial Machine Learning" by Marcos Lopez de Prado. I understand that a time series like stock prices can be transformed to make it sufficiently stationary. ...
85 views

### Exponential Smoothing - Alpha greater than 1

Simple stats question. I'm having trouble finding anything in the literature as to why the smoothing coefficient can never be greater than 1. This question was started by me doing time series ARIMA ...
148 views

### Correlation between stock prices given correlation between returns

assume I have two stocks with known volatilities and a known correlation coefficient of returns - does anyone know how to determine the correlation between the prices and NOT THE RETURNS
250 views

### Filling a few missing data in time series?

I'm writing a paper about Uncertainty indices like VIX, etc. I already collected all data but it seems that some of the variables got a few or a little more missing data. I have daily and monthly data ...
54 views

### How to work with vine copula in R?

I have returns of 4 stocks: stock1, stock2, stock3, stock4. And I use R and library(VineCopula) to do: ...
41 views

### Problem in copula fitting

I have returns of 2 stocks: stock1 and stock2. And I want to fit pair copula. I use this libraries library(VineCopula) library(copula) then I select an ...
46 views

### Approximation of portfolio VaR (after mapping) when Delta and Gamma both equal zero

As titled, I am having trouble estimating the VaR of a portfolio mapped as a function of a single risk factor $S$, in the form : $$V(S) = S^3 - 30S^2 + 300S + 150$$ with current value $S = 10$. $S$...
40 views

### Fit a copula model in R

I want to accomplish the task of creating an optimal portfolio of stocks, the yield between which is modeled using kopulas. And I have data: return of 4 stocks: ...
52 views

### Convolution of Dependent Random Variables with Copulas

Lets say I have 2 different observations which are fitted to a parametric distribution. And lets say that they are dependent and can be modeled by one of the copulas. I want to calculate “a value” ...
54 views

### statsmodels's granger causality tests return value

im a developer(with no background in statistics) and i need to use granger causality test, i cant seem to understand the results of the func. one result: Granger Causality ('number of lags (no zero)'...
96 views

### when a co-integrated times series pair has broken the leash

I have two times series, say $T_i$ and $S_i$ over a reasonably large time window, and I have calculated their cointegration (using python's OLS and Adfuller) . Say that the test has passed with high ...
81 views

### Kalman filter state/measurement noise

In a linear Kalman filter, we assume that the state and measurement noise are white noise N(0,Q) and N(0,R) respectively. Is it common practice to test these hypothesis? And what are the most common ...
46 views

### serial correlation and CUSUM results

I have the following CUSUM test resulted from autoregressive distributed lag models (ARDL). Does the CUSUM results show that the model is stable? I am a bit confused because the red line in CUSUM ...
45 views

### Statistical distribution of MACD

I was (unsuccessfully) trying to find results on what the distribution of the MACD values for a stationary time series with IID returns would be. Are there any such results or any that go in a similar ...
30 views

### Using CFNAI index for identifying sample periods

I'm doing my Thesis on Asset pricing models and I would like to find out the effects of business cycles on the performance of asset pricing models for industry portfolios. My initial idea was to ...
51 views

28 views

### Why Jarque - Bera values are so high? Is this normal? [closed]

Please advise whether the following is a normal occurrence: In the above table I have Autocorrelation at lag1, LB, Skew, Kurt and JB test. I have noticed that whenever the value of Kurt increases, ...
311 views

### Spot price and volatility has a correlation of -1, why?

A stock option trader taught me yesterday that the correlation between the spot price of asset X and the variance of asset X is approximately -1. Can anyone give me a explanation why this is true?
548 views

### What machine learning method is more suitable for prediction of financial time series?

I have time series data for various assets and which I transform to create various features. I have framed the problem as a classification task where I attempt to predict either a positive or negative ...
144 views

### bayes theorem probability Jar [closed]

I am trying to come up with different theoretical answers below. I believe the standard one is based on Bayes theorem, but I am struggling to prove it. A jar has 1000 coins, of which 999 are fair ...
50 views

### Nonlinearity in returns?

Reading academic papers on hedge funds, I find that many authors saying that hedge fund returns are often non-linear and thus many simple quantitative techniques are not suitable. It seems like they ...
142 views

### Why does computing correlation between index levels vs. percentage changes yield completely different results?

I am examining the relationship between the S&P 500 and the Industrial Production Index. Computing the correlation between these these variables yield vastly different results if expressed in ...