Tag Archives: autocorrelation

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

Posted in Market Statistics | Tagged , , | 2 Comments

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

Posted in Asset Allocation, Trading System Analysis, Trend following | Tagged , , , , | 3 Comments

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

Posted in Quantitative trading, Trading System Analysis | Tagged , , , , | Leave a comment

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

Posted in Trading System Analysis | Tagged , , , | 10 Comments

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…

Posted in Premium Content | Tagged , , , , | Leave a comment

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 System Analysis, Trading System Design, Trend following | Tagged , , | 5 Comments

Buying the Random Dips

There is a lot of cash out there and stock market dips, like the one at the open of yesterday, sometimes are perceived as great opportunities. Economic news releases are often used as excuses, in the sense of confirmation bias. This … Continue reading

Posted in ETF Analysis, Technical Analysis | Tagged , | Comments Off on Buying the Random Dips