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Testing the CAPM a la Fama & MacBeth: specific trade-off between expected return and risk

Fama & MacBeth (1973) test a two-parameter model of market equilibrium by examining whether its implications hold empirically. They work with the following generalization of the model: $$ \tilde ...
Richard Hardy's user avatar
2 votes
0 answers
562 views

In sample and out of sample in Mean Variance Optimization

Hello to everyone and thanks again for your help, i have find this forum really helpful while working on my final dissertation. However I'm here again because I have loads of doubts regarding the in-...
renato's user avatar
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0 answers
59 views

how to test OMS functionality via FIX?

Has anyone done app dev that tests OMS functionality ( FIX ) ? Do any brokers or other financial entities make test apis available ?
BaltoStar's user avatar
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1 vote
0 answers
35 views

Trading Platform APIs which support editing holdings

I am developing a tool to assist human traders using a trading platform. For testing, I was wondering if anyone was aware of any trading platforms which support editing the holdings of a paper account....
kyryx's user avatar
  • 111
1 vote
1 answer
121 views

Evaluate the significance of the relationship among VIX and the S&P 500

I have the weekly time series of returns for both VIX and S&P 500. For the VIX I'm looking at 1 week return period (e.g. this is a 5 day return series rolling weekly) For the S&P 500, ...
user209183's user avatar
1 vote
0 answers
428 views

Comparing two models using Wald Test

I would like to use a Wald test to compare two models. To give a basic example, let: $Y_{t}=\alpha+{\phi_1x}_{t-1}+{\beta}_{1}x_{t-1}+{\beta}_{2}x_{t-1}+{\beta}_{3}x_{t-1}+\epsilon_t (A)$ $Y_{t}=\...
user22485's user avatar
  • 469
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0 answers
79 views

CAPM test methodology

Setting If we test the CAPM using Fama-MacBeth regressions we do the following: First, run cross-sectional regressions to determine the beta loading $$ R^i_t- r^f_t = a_i +\beta_i (R^M_t- r^f_t) + \...
Phun's user avatar
  • 624
1 vote
0 answers
64 views

A priori selection of acceptable backtesting errors (type I and II)

Is it possible to a priori select an acceptable values of type I and II errors in backtesting (f.e. in case of the unconditional coverage test)? Type I error is directly connected to the significance ...
abu's user avatar
  • 229
3 votes
1 answer
286 views

Real time stationarity test

I have a trading system based on Machine Learning which is trading 8 symbols intraday. From the results I found out that some weeks of trading are successful for some symbols, then it usually switches ...
Krzysztof Fajst's user avatar
2 votes
0 answers
914 views

Johansen cointegration test interpretation in R

I want to test my time series for cointegration using the Johansen test in R. I got the following result and so I know now that at least 5 out of 9 of my time series are cointegrated. My question is, ...
Anna's user avatar
  • 21
1 vote
1 answer
586 views

Historical Scenario analysis for stress testing

I am doing historical scenario analysis in order to calculate stressed VAR for which I have taken 2007-2008 US crisis. I have two question in this regard:- 1) As we have to take prices for stocks ...
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1 vote
0 answers
53 views

Considerations when programming back testing engine

I am at the beginning of writing a back testing engine and wanted to get some Feed back on considerations I should take into account , design ideas etc.
GKonheiser's user avatar
1 vote
1 answer
156 views

Faster way to backtest/Walkforward

I am currently using Ninja Trader to program and test my strategies and the forward testing in very time intensive. I am thinking of writing my own code in either c++ or c#. The question I have is ...
Gordon's user avatar
  • 31
3 votes
0 answers
209 views

Strategy Testing

Firstly I am a newbie so I will apologise in advance if this is in the wrong forum. My question concerns testing for an equity trading strategy and I would appreciate any comments as to whether my ...
Chris Wilson's user avatar
1 vote
0 answers
364 views

Generalized method of moments concept in CAPM testing

In the course of my master thesis I’ve come across a paper by Carr and Wu (2009) where the authors evaluate whether returns on variance swaps can be explained by the simple CAPM. (really only market ...
anw's user avatar
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3 votes
0 answers
85 views

Test for difference in security returns before and after financial regulation

I'm going to study the effect of corporate credit rating changes (Moody's) on stock prices before and after a specific financial regulation. So far i have used an event study where i have divided the ...
Lickt0rn's user avatar
2 votes
0 answers
41 views

Specifying integration level of time series [closed]

Following model was estimated on 200 observations. How to specify the level of integration of $X_t?$ In brackets there are standard errors and p-value of Breusch-Godfrey test is also shown. $X_t=0,02+...
macgivera's user avatar
  • 105
0 votes
1 answer
77 views

Determining significant difference between to return series

I want to analyse whether two return series are different. I was told to run the following regression: ...
user avatar
3 votes
1 answer
488 views

Compare events effect on stock prices from different time periods

I’m going to test for the effect corporate credit rating announcements have on stock prices through different economic climates (good times vs. bad times). I want to research whether or not the stock ...
Gary Upper's user avatar
1 vote
1 answer
224 views

Residuals in the Ljung box test

does anybody know what type of residuals is used in the Ljung box test in R? raw or standardized? Because basically when I fit a GARCH model using garchFit, the summary() function gives me all the ...
user3384794's user avatar
0 votes
0 answers
66 views

Compare performance buy-and-hold strategies after stock-split

QUESTION: How should I analyze the statistical significance of the difference between two buy-and-hold strategies (or the relative performance) when the samples are not independent? Background: I ...
user avatar
11 votes
1 answer
3k views

What are the main market efficiency measures in the stock market?

I'm going to test for the effect of the change in market efficiency on the stock market portfolio, and, I want to know what are the main measures known in the academic literature in order to compare ...
Quantopik's user avatar
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15 votes
0 answers
390 views

Here is an approach for measuring Data Snooping; is it new?

I came up with an approach for measuring data snooping, or overfitting. My question is whether this approach was published and expanded-on already, or is it new? My approach relies on the observation ...
greg's user avatar
  • 310
2 votes
1 answer
850 views

Local volatility pricer

I am testing a local volatility pricer by comparing its results under two settings: Pricing a 5yr ATM call option with a flat volatility of $0.194$ Pricing the call option with the typically shaped ...
sets's user avatar
  • 1,471
2 votes
0 answers
519 views

How to statistically compare the pricing errors of various option pricing models?

I have three different option pricing models, for which I computed the in-sample and out-of-sample pricing errors. Now I want to test the pricing performance of these three option pricing models ...
JohnAndrews's user avatar
2 votes
1 answer
430 views

Testing for stationarity in large sample sizes

I keep struggling with testing 9 samples if they are stationary. Each of these samples is a real valued time series with 714.000 values. If I use the KPSS test with the each compleete sample set, the ...
jcc's user avatar
  • 21
19 votes
3 answers
759 views

Tests that any system must pass to be taken seriously

In an interview from '96 Bill Eckhardt points out that there are tests that any system must pass to be taken seriously. That is: tests for (1) overfitting, (2) post-dictiveness, (3) maldistribution ...
user avatar
3 votes
1 answer
1k views

a simpler test for normality given skewness, kurtosis and autocorrelation and size of time series

I typically do a JB (Jarque Bera) test and DW (Durbin Watson) tests for check for normality given skewness, kurtosis and autocorrelation of the data. However this requires a CHI distribution table ...
user236215's user avatar
2 votes
1 answer
844 views

Testing a simple stock market trading hypothesis? [closed]

I have a simple stock market trading hypothesis ... Something along these lines: Based on a certain deviation from a stock market index over a 30-day period, 5 certain stocks tend to drift ...
Dan's user avatar
  • 47
20 votes
1 answer
2k views

What techniques are used for testing order book implementations?

I am finishing the implementation of a limit order book for modeling NASDAQ. The order book works off of the ITCH feed. My question is what techniques are typically used for testing order books. I am ...
Steve Severance's user avatar