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.

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46 views

Average of R squared correct/allowed/useful?

I just conducted a Fama-Macbeth analysis to estimate the risk premia of Fama/French. In short, I estimated the betas on a company-individual basis first and then conducted a cross-section regression ...
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43 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 ...
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83 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 ...
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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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491 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 ...
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64 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)'...
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58 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 ...
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33 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 ...
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2answers
313 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 ...
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34 views

How to count [and report] the values of significance at 1% and 5%?

I am slightly confused with this: I have calculated the Chi square for the number of funds and the methods description tells me that if the values I have calculated are greater than 3.84 (6.64) that ...
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46 views

Log likelihood function, GARCH(1,1) with asymmetric term

I am modelling a GARCH(1,1) and a GARCH(1,1) with an asymmetric term. $$h(t)=\omega+\alpha\varepsilon(t-1)^2+\beta\sigma(t-1)^2$$ and $$h(t)=\omega+\alpha u(t-1)^2+\beta\sigma(t-1)^2 + \gamma (u(...
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25 views

Sample distribution of cross-sectional statistics of returns

Currently doing an application of VaR on sample of industry portfolios in the US. I have a matrix of $n$ industry portfolios with $m$ time-series observations. I calculate cross-sectionally (for each ...
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32 views

Choosing observations/sample selection in behaviour credit scoring models

In retail banking the credit risk of a creditor after the credit had been granted is often modeled using behavioral credit scoring. In this setting the customer already has an account (or a few) and ...
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42 views

Identifying primary share class of U.S. firms and deleting excess observations

I have a fairly large dataset of CRSP firms with their daily closing prices from 2006 till 2017. I need to filter the data so that I have one daily observation per unique firm. I've identified the ...
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68 views

Correlation between a sector and MSCI ACWI returns

I have daily return data of 11 sectors of MSCI World Index and the MSCI ACWI index. I want to know the stationarity of correlations between the sectors and MSCI ACWI index. This is what I have done: ...
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38 views

Negative abnormal stock return and permanent impact

Assume we have a day where stock price falls many standard deviations of the mean (e.g >3) . How could we test, in terms of time-series, if this negative shock is permanent or deminishes in the long ...
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48 views

Trading rules: Controlling the portfolio FDR+ level

I'm trying to apply the FDR+ (False Discovery Rate +) methodology from Bajgrowicz (2011) link another_link. I have computed the p-values with the stationary bootstrap as they did, however I am not ...
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44 views

Bootstrapping to Judge the Fit of a Sampled Return Distribution

Consider the following: I have sampled yearly stock returns from a specified distribution. What I want to do is compare how well my sampled distribution fits the empirical distribution of yearly ...
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119 views

Stock returns: Determining the window size

I am looking for a rigorous way to determine a suitable rolling window size for my stock data. Factors that will influence the window size are how fine my data is (minutely, daily, weekly etc.) and ...
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60 views

J-test and Empirical Model Performance of Conditional and Unconditional Estimations (as for example in Cochrane (1996))

Take for example the Consumption-based model with a power utility function estimated by Cochrane in his paper "A Cross-Sectional Test of an Investment-Based Asset Pricing Model" (1996). The following ...
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202 views

Expected shortfall of stable distribution by Stoyanov

I've been working on calculating parametric ES assuming the returns follow Paretian stable law. Given the four parameters - $\alpha, \beta,\sigma,\mu$- Stoyanov introduces closed form solution of the ...
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94 views

Transformation of GARCH Equation to multiple-day Forecast Equation

I want to understand the procedure of how to predict with the GARCH Modell. Therefore it is said that a one day ahead forecast is easy due to the fact that the GARCH equation can produce this. ...
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50 views

Distribution of loans by types of interest

Im looking for some kind of report that would inculde data on the distribution of corporate loans by types of interest(fixed/floating), specifically global not just for one country(developed, ...
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162 views

logistic regression multivariable fractional ploynomials stata vs. R

I a going through Hosmer, Lemenshow and Sturdivant's (HLS) Applied Logistic Regression (2013) and trying to interpret the difference between what STATA is doing and what R is doing. Concerning the fit ...
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115 views

Proper Definition of Backtesting Parameter

Currently I'm trying to test the efficacy of a tail-hedging strategy in which an investor goes long in an index and correspondingly buys 1-month OTM put options. For practical reasons, the options ...
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78 views

state space for affine yield curve

i would like to reproduce in R the working paper " Affine free arbitrage class of Nelson Siegel term structure". The authors considering the equation of nelson siegel plus an adjustment term(C(t,T)) ...
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29 views

How do I calculate what % of price hits R1 before pivot

I am trying to calculate what % of times the price touches R1 before the pivot level. I have the data for the last 10 years and know how often it touches the R1 one and pivot point but I don't know ...
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211 views

ISM PMI data - sector trend through ranking and seasonal decomposition

I have monthly data for each of the 18 sectors in the ISM PMI. Each datapoint shows the trend of a sector: growing, contracting or neutral. It also tells the strength of that trend with a number: "...
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140 views

Create Markets Bubble Indicator

I am trying to replicate a Bubble Indicator described here. The indicator is strictly based on calculating the regularity of price behavior to determine herding in multiple time frames. I tried the ...
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0answers
85 views

How to value a portfolio of non-mature consumer loans?

I'm looking for the best way to value a portfolio of consumer loans that have NOT reached maturity and for which I do observe the payment/default history to date? I'm working with a large database of ...
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661 views

Autoregressive distributed lag models ADL(p,q) howto in preferably matlab (stata/R/python/C# etc)

Could anyone provide me the details of how to determine the lag order of the distributed lags for an ADL(p,q) model in Matlab or another statistical package (and very much preferably in combination ...
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81 views

Sampling and/or asymptotic distribution of a function

Assume we have the following function: $$f(p) = \frac{1}{(1-p)d}\ln\left(\frac{1}{T}\sum_{t=1}^{T}\left[\frac{1+X_t}{1+Y_t} \right]^{1-p} \right)$$ where $d$ is a constant $T$ is a constant $X_t$ ...
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75 views

Completing the financial investment disclaimer platitude with statistics terminology

Take the typical disclaimer often seen where investment products can be found. Here is a sentence from the fine print of BlackRock's fundamental equity fund page: Performance data quoted represents ...
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35 views

Real estate returns with incomplete dataset?

I have a dataset of real estate returns in markets A, B, and C. I also have national returns, denoted market N. I have 10 columns representing the time period for each data point. Market A only has ...
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93 views

How skewed are FX returns? Does this look like a plausible histogram of EURUSD?

I'm reading about volatility. I've charted the histogram of EURUSD and I am wondering if this looks plausible? What I've charted are the 1-hour percent change returns (not log returns). I've removed 0 ...
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34 views

How to calculate the longest expected losing streak for a system that trades all the index members simultaneously?

For a trading system that trades only one security we can easily compute the longest expected losing streak using this formula: where: n is the number of trades, ln is natural logarithm, P is the ...
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60 views

solve.QP in R doesn't give a solution satisfying the constraint

I've dealing with a quadratic programming problem as following, and my objective is to get a 49*1 vector. $$\widehat{\boldsymbol{w}}^{0}(\tau):=\underset{\boldsymbol{w}(\tau) \in \mathbb{W}}{\arg \min ...
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40 views

What does p-value adjustment under FWER do?

The background is I am predicting a time series with three strategies, the hypotheses is the strategies have a non-zero Sharpe ratio. I am reading Backtesting, by Campbell Harvey and Yan Liu paper in ...
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30 views

Computing statistics from historical returns

I'm reading age 35 of "Advances in Machine Learning" by de Prado. Consider an IID multivariate Gaussian process characterized by a vector of means μ, of size Nx1, and a covariance matrix V, ...
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71 views

Martingale stochastic processes

Does anyone know how to do this question? A player whose initial holding is $N$ bets 1 on each game of a series of independent identical parts. He loses his bet whether he loses or he wins but, if he ...
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72 views

What should degrees of freedom $\nu$ be set to when modeling financial returns that follow the t-distribution?

The closer the t-distribution degrees of freedom ($\nu$) is to 0, the more heavy are the tails, whereas high degrees of freedom recovers the normal distribution. In finance, what value is usually used ...
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40 views

How to understand the results of the Johansen test?

So I now there are numerous pages on the johansen test, and what the results mean. Though I am confused as to what it is doing exactly. So my understanding is that it will find the spread of 2 ...
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35 views

Comparing curve fits

I am experimenting with building a forward curve. I have a piece of code which constructs my prototype curve. I've got a curve sample which was constructed manually and I use it as the baseline - the &...
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45 views

Escape Dynamics in financial economics or time series

These slides describe escape dynamics to be a type of, or having some relation to, rare event(s). Black swan events in business cycles was also included under the definition of rare events. My guess ...
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257 views

How to annualize skewness and kurtosis of a forecasted distribution

I have a (non-normal) distribution of expected cumulative returns 10 quarters in the future, from which I have calculated mean, standard deviation, skewness and kurtosis. I would like to annualize ...
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81 views

Understanding output from Johansen Cointegration test

I have a VECM model that Im using to determine the revenues for a firm, based on factors like Interest rates, S&P 500 and company specific variables, as follows: Stage 1: $$z_t= a+ bX_t+e_t$$ ...
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1answer
49 views

Performance attribution of indices to their sector weights

Is it possible to attribute performance of indices (monthly returns and risk measures - Sharpe ratio, etc.) to their sector weights (if I know them)? Example: I know the monthly performance of ...
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19 views

Sample conditional multivariate random variable?

There's multivariate random variable, future prices of assets, 5 years from now: $$X = [Gold, Silver, SP500]$$ There's historical prices for $X$ available for last 50 years. It's possible to fit ...
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244 views

Fama-Macbeth Regression: Weird Risk Premia

I just conducted a Fama-Macbeth regression where in the first step I calculated a time-series regression for each individual stock to get three betas (for mkt-rf, smb, hml) for each stock. Then I ran ...
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60 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 ...