Blog Archives

Understanding Multicollinearity

June 12, 2013
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Understanding Multicollinearity

Roughly speaking, Multicollinearity occurs when two or more regressors are highly correlated. As with heteroskedasticity, students often know what does it mean, how to detect it and are taught how to cope with it, but not why is it so. … Continue reading →

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How Important is Variable Selection?

May 22, 2013
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How Important is Variable Selection?

Very. If you have 10 possible independent regressors, and none of which matter, you have a good chance to find at least one is important. A good chance being 40%: prob(one or more looks important) = 1 – prob(non looks … Continue reading →

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Quantify your jogging

April 28, 2013
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Quantify your jogging

Numbers are useful (I think we can all agree on that..). If you own a smart phone, you can install this runmeter app. When you run, you can take the smartphone with you and activate this app to collect interesting … Continue reading →

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R and Dropbox

April 15, 2013
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When you woRk, you probably have a set of useful functions/packages you constantly use. For example, I often use the excellent quantmod package, and the nice multi.sapply function. You want your tools loaded when R session fires. In order to … Continue reading →

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Moving Average Representation of VAR

March 10, 2013
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Moving Average Representation of VAR

A vector autoregression (VAR) process can be represented in a couple of ways. The usual form is as follows:     The above (AR process) is what we often see and use in practice. However, I recently see more and … Continue reading →

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Quantile Autoregression in R

February 9, 2013
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Quantile Autoregression in R

In the past, I wrote about robust regression. This is an important tool which handles outliers in the data. Roger Koenker is a substantial contributor in this area. His website is full of useful information and code so visit when … Continue reading →

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Live Correlation plot, shiny improvement.

December 16, 2012
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Open CPU is a great project. Few months back, I wrote a function for plotting a moving window of the market average correlation. Jeroen C.L. Ooms was nice enough to upload it to their server. Something is now changed. Quotes … Continue reading →

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A Simple Model for Realized Volatility

December 9, 2012
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A Simple Model for Realized Volatility

The post has two goals: (1) Explain how to forecast volatility using a simple Heterogeneous Auto-Regressive (HAR) model. (Corsi, 2002) (2) Check if higher moments like Skewness and Kurtosis add forecast value to this model. It will be a high … Continue reading →

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Most profitable hedge fund style

April 21, 2012
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Most profitable hedge fund style

This is not an investment advice!! Couple of weeks back, during amst-R-dam user group talk on backtesting trading strategies using R, I mentioned the most effective style for hedge funds is relative value statistical arbitrage, I read it somewhere. After … Continue reading →

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Bootstrap example

March 30, 2012
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Bootstrap example

Bootstrap your way into robust inference. Wow, that was fun to write.. Introduction Say you made a simple regression, now you have your . You wish to know if it is significantly different from (say) zero. In general, people look … Continue reading →

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