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Ken, with those warning signs, I'd agree that you **may** be wise to
take a second look, lol. I've posted some other info on degrees of
freedom this morning that you may find interesting. Mark
--- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <closeks@xxxx> wrote:
> Mark: thanks for the responses. Indeed it is tricky for me to keep
> straight. My warning signs are if I am producing > 200CAR, with
>90%
> accuracy and <10%dd I **may** give some thought to it being
> overoptimized and curve fit. :-o
>
>
> Ken
>
> -----Original Message-----
> From: quanttrader714 [mailto:quanttrader714@x...]
> Sent: Wednesday, November 19, 2003 10:34 AM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: Optimizing Selection Criteria vs Timing
Signals
>
> These are great questions. Comments below.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <closeks@xxxx> wrote:
> > Do the same pitfalls and prohibitions exist for keeping a constant
> > timing signal (whatever it is) yet optimizing variables that alter
> > basket selection criteria? Can you "curve fit" a set of selection
> > criteria?
>
> Here, it's pretty clear cut. You're reducing degrees of freedom and
> whenever you do that, you're curve fitting.
>
> > It "feels" like the problems would be different (and perhaps
> minimized)
> > because of the dynamic changes that occur, ESPECIALLY if stop
> conditions
> > are used. OTOH, I suppose it would not be different using the
same
> > criteria on the same basket of stocks over the same time period
as
> this
> > would yield the same baskets of stocks each time. What I mean by
> that
> > is that for a given combination of criteria, the same stocks would
> be
> > selected.
>
> This part is trickier. Could be debated but I'd say that if your
> constant basket of stocks is not necessarily all stocks but the
> *universe* of stocks that you would consider trading or a random
> sample of it, you're not reducing degrees of freedom. Because your
> code is free to choose any stock (that you'd trade). But when you
> restrict that freedom, you're curve fitting.
>
>
>
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