tag:blogger.com,1999:blog-35364652.post709974332562319000..comments2017-06-25T23:10:22.126-04:00Comments on Quantitative Trading: Mean reversion, momentum, and volatility term structure Ernie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comBlogger85125tag:blogger.com,1999:blog-35364652.post-76412360834609485032016-08-07T09:11:35.764-04:002016-08-07T09:11:35.764-04:00Hi Pavel,
The log2(t) on the x-axis is for display...Hi Pavel,<br />The log2(t) on the x-axis is for display purposes only. In my actual linear regression, I have taken the natural log of both variance and timescale.<br />Hope this helps.<br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-30539367713548184672016-08-07T08:50:47.420-04:002016-08-07T08:50:47.420-04:00Hi Ernie,
I was trying to replicate your results ...Hi Ernie,<br /><br />I was trying to replicate your results and noticed that because of you are taking logarithm from time based on 2, i.e. log2(Time), you should also take log2 from variance, i.e. log2(Var). Please correct me if I'm wrong. You didn't make this explicit, so I was straggling a bit. Thank you for the great topic.<br /><br />PavelPavelBhttp://www.blogger.com/profile/06264109362858532526noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-89102258751978717962016-08-02T11:48:57.415-04:002016-08-02T11:48:57.415-04:00Chris,
The significance testing in this specific c...Chris,<br />The significance testing in this specific context is to see if the Hurst exponent for random data of the same size will have the same value as what we obtained. The conclusion is that if we assume Gaussian distribution of such values, the chance that this happens is less than 2.5%. Hence with better than 97.5% probability this is a trending price series.<br /><br />See also p. 16 of my second book, section on Statistical Significance of Backtesting: Hypothesis Testing.<br /><br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-41927684193210811982016-08-02T11:35:48.161-04:002016-08-02T11:35:48.161-04:00The mean of what exactly?The mean of what exactly?Chris Jakobsenhttp://www.blogger.com/profile/17214334228257970653noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-18612087303348076702016-08-02T11:01:01.964-04:002016-08-02T11:01:01.964-04:00Hi Chris,
Yes, I use the word "significant&qu...Hi Chris,<br />Yes, I use the word "significant" in a specific sense. It means that it is more than 2 standard deviations away from the mean.<br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-60915897482953820582016-08-02T10:43:08.676-04:002016-08-02T10:43:08.676-04:00Sorry, between 0 and 1, my bad.
I was referring t...Sorry, between 0 and 1, my bad.<br /><br />I was referring to the following you wrote: "We can do the same analysis for USO (the WTI crude oil futures ETF). The intraday H is 0.515±0.001, indicating significant trending behavior. The daily H is 0.56±0.02, even more significantly trending."<br /><br />ChrisChris Jakobsenhttp://www.blogger.com/profile/17214334228257970653noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-64766076121904682982016-08-02T10:09:58.782-04:002016-08-02T10:09:58.782-04:00Hi Chris,
Actually H is between 0 and 1. It isn...Hi Chris,<br />Actually H is between 0 and 1. It isn't realistic to have negative H, because that would imply prices remain constant over the long term.<br /><br />Whether a price series is trending or not depends on whether it is statistically significantly greater than 0.5. Some of the price series I noted in the article passed this significance test by a good margin. However, I failed to find the adjective "strongly" mentioned in my article above. Can you please point out the sentence?<br /><br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-49154137785321615262016-08-02T08:52:01.018-04:002016-08-02T08:52:01.018-04:00Hi Ernie,
If I understand it correctly from your s...Hi Ernie,<br />If I understand it correctly from your second book p. 45, the Hurst Exponent can be between +1/-1. When 0.50 is random walk, it strikes be as bold to claim that H = 0.56 is STRONGLY trending as you do in the above article. I would have guessed that strongly trending would be H = 0.8 or thereabouts??<br /><br />Chis.Chris Jakobsenhttp://www.blogger.com/profile/17214334228257970653noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-72352929653976998672016-06-29T12:32:39.984-04:002016-06-29T12:32:39.984-04:00Great article!Great article!Sqrt Alphahttp://www.blogger.com/profile/14496960785936577254noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-18730673890269784872016-06-16T11:23:35.289-04:002016-06-16T11:23:35.289-04:00You are correct.
ErnieYou are correct.<br /><br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-48840017700520700972016-06-15T21:57:52.686-04:002016-06-15T21:57:52.686-04:00Hi Ernie,
Thank you for quick response.
Is it be...Hi Ernie,<br /><br />Thank you for quick response.<br /><br />Is it because of ill-liquid for small cap stocks?<br /><br />Thanks.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-51749342668998390682016-06-15T21:30:23.702-04:002016-06-15T21:30:23.702-04:00Not at the moment.
ErnieNot at the moment.<br /><br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-3965639440849261272016-06-15T20:03:58.875-04:002016-06-15T20:03:58.875-04:00Hi Ernie,
Do you trade Russell 2000?
Thanks.
Hi Ernie,<br /><br />Do you trade Russell 2000?<br /><br />Thanks.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-64283255163360431752016-06-13T07:34:37.151-04:002016-06-13T07:34:37.151-04:00We trade mostly intraday strategies, because of th...We trade mostly intraday strategies, because of their higher statistical significance and lower risk. Yes, they do have lower capacity, but then we don't have billions to manage at this point. We are, however, working on strategies with longer holding period and higher capacity, and will be able to launch soon.<br /><br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-37888576305098451022016-06-13T04:12:05.485-04:002016-06-13T04:12:05.485-04:00Hi Ernie,
Do you trade only intraday strategies?
...Hi Ernie,<br /><br />Do you trade only intraday strategies?<br />Are the capacity of intraday strategies limited?<br /><br />Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-14296394427513707302016-06-05T18:06:28.968-04:002016-06-05T18:06:28.968-04:0010 bps one way.
Ernie10 bps one way.<br /><br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-28066592060524818732016-06-05T17:51:04.542-04:002016-06-05T17:51:04.542-04:00Hi Ernie,
What is the reasonable assumption of tr...Hi Ernie,<br /><br />What is the reasonable assumption of transaction costs for Russell 2000 stocks?<br /><br />Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-50554621778399232502016-06-01T01:16:16.158-04:002016-06-01T01:16:16.158-04:00wow goodwow goodAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-35675497321651081532016-05-31T08:40:37.456-04:002016-05-31T08:40:37.456-04:00You have amazing explanations of price actions. an...You have amazing explanations of price actions. anyone who wants to learn forex trading should look at your stuff which has helped me tremendously with my trading.<br />GustavoWoltmannnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-45281176971209690652016-05-29T07:44:52.152-04:002016-05-29T07:44:52.152-04:00Thanks for sharing your experience!
ErnieThanks for sharing your experience!<br /><br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-57308726050472564902016-05-28T19:26:09.098-04:002016-05-28T19:26:09.098-04:00Hi Ernie,
I find that intraday long-short mean re...Hi Ernie,<br /><br />I find that intraday long-short mean reverting strategy does not work for SP500 stocks since May 2010.<br /><br />Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-1287523076226016912016-05-28T16:18:05.004-04:002016-05-28T16:18:05.004-04:00See the VX strategy discussed around Figure 5.12 i...See the VX strategy discussed around Figure 5.12 in my book Algorithmic Trading.<br /><br />ERnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-65068457987432835322016-05-28T15:36:40.756-04:002016-05-28T15:36:40.756-04:00Hi Ernie,
Thank you for quick response!
May I as...Hi Ernie,<br /><br />Thank you for quick response!<br /><br />May I ask what are short volatility strategies you would recommend?<br /><br />Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-63593780643590198222016-05-28T15:28:42.689-04:002016-05-28T15:28:42.689-04:00Typically, long-short strategies depend on volatil...Typically, long-short strategies depend on volatility to earn returns. Volatility in the stock market has been very low in the last few months.<br /><br />You can always run a short volatility strategy in this market condition.<br /><br />ErnieErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-78629997671985982482016-05-28T15:19:38.958-04:002016-05-28T15:19:38.958-04:00Hi Ernie,
Do you know why it is hard to make long...Hi Ernie,<br /><br />Do you know why it is hard to make long-short stock strategies work this year?<br /><br />How do we deal with it? Thanks.Anonymousnoreply@blogger.com