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Kenneth Rogoff and Richard Meese received an incredulous reaction to their now-famous paper showing that random-walk (RW) forecasts outperform economic models of exchange rates. Reactions were along the line of “You just cannot possibly have done it right” or "the results are obviously garbage". Turned out they were correct. Rogoff makes an ...


0

The crux of the answer is that a non-significant serial correlation will produce significant price action. Granger and Newbold (1973) showed that completely unbiased random walks of returns generated statistically significant "trends" in price more often than not :-) [The rising variance over time violates the stationarity of price, if you want to ...


1

Let $R_d$ be the return for day $d$. Mean reversion means that $cor(R_d,R_{d+1})$, $cor(R_{d+1},R_{d+2})$, etc. are all negative--which is actually close to truth. Under conditions not too hard to come up with, you can have $cor(R_d,R_{d+2})>0$ and $cor(R_d+R_{d+1},R_{d+2}+R_{d+3})>0$ simultaneously with mean reversion. The last inequality is a two-...


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I find this thread very interesting. I agree 100% that it would not be possible to run an HFT program through IB for the reasons noted. However, HFT and market making are not the same thing in my mind. HFT is front running other market participants by detecting their orders before anyone else does and them buying or selling in front of them, which is why ...


0

Just for extra clarification of the Tick and Tick Value of how it is equated and calculated, the following is a description, For this Futures Contract, 1 Tick = 5 Points, a 1 Tick Value = 500 Yen. A 1 Tick Move, equates to 500 Yen ( 1 Tick = 500 Yen ) . So in other words, a 5 Point Move, equates to 500 Yen ( 5 Points = 500 Yen ) .


2

Let's apply basic utility theory. Note that the expected utility is driven by the outcomes, their probabilities and the initial wealth $W_0$ of the gambler (see @Dimitri's comment to your question). Let $\mathrm{EU}$ denote expected utility $$ \mathrm{EU}\equiv\sum\limits_{i=1}^np_iu(x_i+W_0) $$ and $\mathrm{CE}$ be the certainty equivalent (or money ...


1

500 yen/tick = 500 yen / (5pts)


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