Welcome to my online repository of research and insights on automated trading system development
It’s nearly the end of the Summer and I hope you enjoyed a nice time. The blog will go on a short break until the end of August, while I (hopefully) enjoy some good weather in the French Cevennes and the English Lake District. In the mean time, I’ll leave you with a link to [...]
Entries from August 20th, 2010
Monte Carlo Permutation: Test your Back-Tests
August 18th, 2010 · 2 Comments · Backtest
The second method to evaluate the statistical significance of a back-test result presented by Aronson (in EBTA) is the Monte Carlo Permutation. This is an extension of the classic Monte Carlo method, applied to rule testing. The concept behind the Monte Carlo Permutation is similar to the Bootstrap method: Generate multiple random outputs based [...]
Tags: aronson·monte-carlo
Bootstrap – Take 2: Data Mining bias, Code and using geometric mean
August 13th, 2010 · 34 Comments · Backtest, Code
In part 1 of this bootstrap post, we looked at how to apply the method to establish the statistical significance of a single trading rule. In Part 2, we’ll look at how to deal with the data mining bias, the impact of geometric vs. arithmetic mean return. The code implementing the bootstrap test is available [...]
The Bootstrap Test: How significant are your back-testing results?
August 11th, 2010 · 26 Comments · Backtest, Books
As mentioned in the Evidence-based Technical Analysis review post, the main value of the book lies in the presentation of the two methods allowing for computing the statistical significance of trading strategy results, despite having a single sample of data: Both methods solve the problem of estimating the degree of random variation in a test [...]
Tags: aronson·bootstrap·data mining
VIX, Peso… Sometimes you just cannot trade it!
August 9th, 2010 · 5 Comments · Futures
Or a case for going short VIX despite high bullish consensus? I have been going on about roll yield and term structure for a few posts, and through two very concrete examples we’ll see how it can affect your trading and system development A reader recently mentioned a paper (pdf by Sloyer and Tolkin) presenting [...]
Tags: peso·roll yield·VIX
