Tag Archives: serial correlation

The Problem With This Stock Market Is Not The Volatility

During the 2011 correction, daily volatility was persistent and higher than it has been during the present correction. The problem is not the high volatility because after all that may be a signal of a correction ending but the reappearance … Continue reading

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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.

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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 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

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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.

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