Tag Archives: autocorrelation

The Time Period In The Stock Market When Almost Everything Worked

Almost all trading and investing methods worked in the time period from the mid 1990s to the top of the dot-com bubble. Academic papers and technical analysis results that consider data from that period may be getting fooled by conditions … Continue reading

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S&P 500: Increase In Autocorrelation Persists During Rebound

A comeback of positive autocorrelation in S&P 500 returns after about 14 years can be attributed to the recent correction and subsequent rebound.  This had had a negative impact on some popular mean-reversion strategies. Momentum algos may benefit if the … Continue reading

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Long-Term Backtests Can Be Misleading

Authors of popular books and blog articles often present long backtests of certain strategies that exhibit superb risk-adjusted performance. It is important to realize that it is highly possible that these superb results are due to market conditions that may … Continue reading

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Short-Term Mean Reversion in Action

Since November 3 there has not been a two-day winning streak in S&P 500.  Despite that, prices reverted back near their highs after a short-term correction. This is mean reversion in action and it is part of the new market … Continue reading

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Time-Based Exits, Trend Filters and Misleading Backtests

Some technical analysts use time-based exits and trend filters in their backtests. However, these can be quite misleading if at some point in time there was a major shift in market conditions. I offer a specific example to demonstrate this … Continue reading

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RSI2 and WR2 System YTD Performance in Securities with High and Low Serial Correlation [Premium Articles]

This premium article shows specific examples that confirm findings in a recent blog regarding the impact of autocorrelation on the performance of the RSI2 and WR2 systems. This is premium content. Please login or subscribe to continue reading…

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Fooled by Persisting Market Conditions

This article is related to the previous article on the RSI(2) but also conveys a much more general message about the impact of persisting market conditions and how they can fool trading system developers. In the case of the RSI(2) it was … Continue reading

Posted in Market Statistics, Quantitative trading, Trading Strategies, Trend following | Tagged , , | 5 Comments