Blog Archives

The indices understate the carnage

August 9, 2011
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The indices understate the carnage

The first 6 trading days of August have been bad for the major indices, but how variable is that across portfolios? To answer that, two sets of random portfolios were generated from the constituents of the S&P 500.  The trading days are 2011 August 1 — 5 and 8. The returns of the indices for … Continue reading...

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More S&P 500 correlation

July 28, 2011
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More S&P 500 correlation

Here are some additions to the previous post on S&P 500 correlation. Correlation distribution Before we only looked at mean correlations.  However, it is possible to see more of the distribution than just the mean.  Figures 1 and 2 show several quantiles: 10%, 25%, 50%, 75%, 90%. Figure 1: Quantiles of 50-day rolling correlation of … Continue reading...

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Registration closing for UseR! 2011

July 18, 2011
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Registration closing for UseR! 2011

Friday July 22 is the last day on which you can register for UseR! 2011 at the University of Warwick.  The conference will be 2011 August 16-18. You can peruse the book of abstracts and view the draft schedule. I am scheduled to give a talk on “Random input testing with R”.  The abstract is: … Continue reading...

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On “Stock correlation has been rising”

July 17, 2011
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On “Stock correlation has been rising”

Ticker Sense posted about the mean correlation of the S&P 500. The plot there — similar to Figure 1 — shows that correlation has been on the rise after a low in February. Figure 1: Mean 50-day rolling correlation of S&P 500 constituents to the index. For me, this post raised a whole lot more … Continue reading...

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Testing an S&P 500 prediction

July 10, 2011
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Testing an S&P 500 prediction

If a particular prediction comes true, how surprised should we be? The prediction The page that sparked my curiosity tells of a prediction made a year ago that the S&P 500 would beat its historic high by the end of 2011.  It says that at the point the prediction was made, the level of the … Continue reading...

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Winsorization

June 30, 2011
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Winsorization

Winsorization replaces extreme data values with less extreme values. But why Extreme values sometimes have a big effect on statistical operations.  That effect is not necessarily a good effect.  One approach to the problem is to change the statistical operation — this is the field of robust statistics. An alternative solution is to just change … Continue reading...

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Talking The R Journal latest release

June 24, 2011
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Talking The R Journal latest release

Volume 3/1 of The R Journal has been released. It of course has articles about using R.  In addition it has a feature that I highly support.  In preparation for the UseR! Conference 2011 August 16-18 in Coventry there are two Help Desk articles on making a good technical presentation. Technical presentation Rob Hyndman writes … Continue reading...

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Performance ratios, bootstrapping and infinite variances

June 18, 2011
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Performance ratios, bootstrapping and infinite variances

If returns had infinite variance, would there be a problem bootstrapping information ratios? Background There is a discussion on the Quant Finance group of LinkedIn with the title: “How do you measure the confidence intervals of performance ratios?” One suggestion was to use the statistical bootstrap. This resulted in a discussion of the efficacy of … Continue reading...

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Market arrows

June 16, 2011
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Market arrows

Graphs like Figure 1 are reasonably common.  But they are not reasonable. Figure 1: A (log) price series with an explicit guide line. Some have the prices on a logarithmic scale, which is an improvement on the raw prices. The problem with this sort of plot is that two particular data points are taken as … Continue reading...

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Selections from the R/Finance conference

June 2, 2011
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Selections from the R/Finance conference

The R/Finance conference happened in Chicago at the end of April.  If, like me, you weren’t there, you can still benefit from it because slides from many of the talks are now online. Here is a quick synopsis (in chronological order) of some of the talks I found most interesting. Michael Kane Michael Kane and … Continue reading...

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