Tag Archives: serial correlation

Is a Bear Market Inevitable?

I will attempt to answer this question in the context of quantitative analysis. A bear market will benefit technical traders at the expense of passive investors. Therefore, the passive crowd will fight hard to avert of major top formation. Share

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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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Trend-following is Dead

Arguments in support of trend-following usually rest on performance achieved by the CTA group in the 1990s. Recent performance of this group has deteriorated due to changes in market dynamics. Trend-following of equity indexes has performed better recently due to … 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 blog is related to the previous blog 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 … Continue reading

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Fooled by Monte Carlo Analysis

Simple Monte Carlo analysis tools are often used to assess the risks of trading systems and to determine appropriate capitalization levels. However, simple trade reshuffling algorithms can produce misleading results in many cases and fool their users. Share

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Long Consolidations Within a Tight Range are Caused by Low Volatility

The S&P 500 is now in a 58-day consolidation pattern with a tight range of less than 4.5%. As it may be seen from the chart below, these long consolidations are caused by extended periods of low volatility that often … Continue reading

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