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Hi I was checking something in one of Taleb's books and came across the bit where he talks about setting up his Bloomberg screen with various prices & indicators so he knows if something happening in the market is significant or just noise. Got me thinking - what are the key indicators...

ezbentley Look at the two articles DSA and DSA2 (Daily Stock Activity) plus DSO (Daily Stock Oscillation). Also plot your own graph of overnight change v daily change - see which stocks have a bias towards one or the other

Have you seen this: http://dack.com/misc/aeron.html The videos are a great - I can relate to every issue they complain about

Martinghoul - I haven't used any other cointegration tests. I originally studied cointegration in college and then later came across DF in a C++ COM and later in a Matlab toolbox so I have stuck to what I know and can use in my coding. I have read some work comparing the different...

Sorry ezbentley, I misunderstood. Spearman etc is an OK method but in my opinion not as robust as cointegration. The correlations may break down and not recover - yes that could also happen with cointegration, but the distribution of the cointegration is tested in the dickey fuller so you...

Hi Stat arb is based on cointegration, not correlation. Chan describes it nicely in the article: Cointegration is not the same as correlation http://epchan.blogspot.com/2006/11/cointegration-is-not-same-as.html Cointegration tests mean reversion, correlation doesn't. I test for...

Free Excel add-in for cointegration: http://www.web-reg.de/adf_addin.html# I have used it and it works fine. For a good explanation of cointegration see Gummy. The site has changed now so you have to hunt around, but Gummy was archived so if you go here ...

You want higher correlation. Remember you are looking for the unusual variation (2+ standard deviation), because when things deviate they will have a higher probability of snapping back - as the stocks are highly correlated - as per your suggested method If you chose the lower correlated...

I haven’t noticed any discernable changes in the stat arb space this year. I have heard that more hedge funds are returning to this type of trading, but due to my smaller scale and diversification across many pairs and baskets I can be a lot more nimble than them and hence still extract an...

Hi again Aug 2007 – intra-day strategies were profitable virtually every day – certainly net profitable at 31 Aug. For the whole month – arb strategies held overnight, minor profit at month end but there was a nasty drawdown mid month. Returns – for your standard ETF versus basket...

Hi I have taken a fair bit from Elite over the years (just running keyword searches over the old posts throws up heaps of good stuff) so here I am giving something back. I do stat arb every day and make money so I know a thing or two about it. Many people will most likely recommend: Pairs...

Please count me in as well Mainly options and pairs trading here (stocks & FX)

Hi I was searching Google for double diagonal and it found a handy word document titled The Double-Diagonal Strategy that was posted here at elite. However I can't find the corresponding post nor the thread. In the word doc the author says they covered other topics in an earlier class so...

I use the calculators here found here http://www.hoadley.net/options/options.htm

http://www.castrader.com/ No longer updated - but it references some excellent material if you have a quant lean. http://epchan.blogspot.com/ Another quant site - the author also has written a book that I found very useful. http://abnormalreturns.com/ Links daily to articles of...

Hi I have to code some tick trades into one minute bars. If the first trade is at 9:00:00 I assume the minutes are measured from 9:00:00, so 9:01:00, 9:02:00 etc What if the first trade is at 9:00:45, is the minute bar any tick between 9:00:00 to 9:01:00 or do I add 60 seconds onto...

Hi For a stock I want to create deciles of implied volatility using McMillan's formula from page 467 of the third edition of Options as a strategic investment. This will be based on 500 days of data with the "overall" IV averaged over 20 days. Essentially the implied volatilities are...

Hi I would have posted this under Software, but that seems to be mainly for trading platforms. Has anyone used the EnCorr Asset Allocation software by Morningstar? It says it does MVO, Monte Carlo, Black-litterman etc. There's a free trail, but is it worth my time looking at it? Or...

Hi A mean variance optimizer (MVO) returns an "optimal" portfolio that has the highest return with the lowest volatility. Its inputs are the expected returns, volatilities and correlations. How does an Expected Utility Optimizer differ? The one I have gives a risk adjusted return based on...

Hi Say an investment has an annual return of 10%, with a standard deviation of 20% I put in $100 so at year end I have 110 At end of year 2 I have $121 At end of year 3 $133.10 However the Std is 20% so really isn't it true that my final return will lie between an upper and lower...