Can linear regression analysis really predict the future?
- Thread starter tradrejoe
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There were two pieces to the forecast, the earnings forecast and then the P/E forecast, then the two were multiplied together.
The pink is a 13 week ahead forecast, so it was directionally correct. I also published the same forecasting method in Stocks and Commodities in September 1991, with a pretty good forecast for back then, which I should have perfected, but after grad school and that recession, and the internet consisted of bbs, i got a regular finance job.
I recently upgraded to the latest forecasting software version, but i don't have all the data to redo another forecast. ..
sportsguy
The pink is a 13 week ahead forecast, so it was directionally correct. I also published the same forecasting method in Stocks and Commodities in September 1991, with a pretty good forecast for back then, which I should have perfected, but after grad school and that recession, and the internet consisted of bbs, i got a regular finance job.
I recently upgraded to the latest forecasting software version, but i don't have all the data to redo another forecast. ..
sportsguy
Linear Regression (method of least squares) is a good tool. How can it not be? It was invented by the greatest mathematician of all time to predict the orbit of Ceres.
My preference is to use the time varying generalization of LR, the Kalman Filter. This way, you don't need to do windowing and the problems (in the frequency domain) that this windowing entails.
My preference is to use the time varying generalization of LR, the Kalman Filter. This way, you don't need to do windowing and the problems (in the frequency domain) that this windowing entails.
Here are 3 distributions for the last 1000 daily bars on SPY for:
close minus open
close minus cubic spline
close minus pivot
The cubic distribution is not normal, I'm not sure why that is. The best curve for a mean reversion trading approach looks to be the close minus pivot.
Maestro, any thoughts on this before I test some trading rules?
Tom
close minus open
close minus cubic spline
close minus pivot
The cubic distribution is not normal, I'm not sure why that is. The best curve for a mean reversion trading approach looks to be the close minus pivot.
Maestro, any thoughts on this before I test some trading rules?
Tom
Here's a sample equity curve for 1000 daily bars of SPY.
Strategy: long on a close below pivot, short above.
Also, here is an interesting paper by John Ehlers on deriving a trading strategy from the distribution curve:
http://www.mesasoftware.com/technicalpapers.htm (first paper)
Tom
Strategy: long on a close below pivot, short above.
Also, here is an interesting paper by John Ehlers on deriving a trading strategy from the distribution curve:
http://www.mesasoftware.com/technicalpapers.htm (first paper)
Tom
That was an excellent paper. Not terribly long but full of interesting ideas.