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If you google "block bootstrap" you'll find a bunch of interesting
papers. I can also email you a more practical presentation on the
bootstrap that was given at one of the Society of Actuaries' annual
meetings. It's a decent primer and it includes a block bootstrap
example. PM me if interested.
--- In amibroker@xxxxxxxxxxxxxxx, "brian.z123" <brian.z123@xxx> wrote:
>
> Hello QT,
>
> I was hoping you would join the party.
>
> I have been speculating about this concept but so far I haven't cone
> up with any references.
> Any chance that you know a website or author who discusses this?
>
> BrianB2.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "quanttrader714"
> <quanttrader714@> wrote:
> >
> > One way to approach this is with a form of the block bootstrap, by
> > resampling blocks of consecutive observations of random length
> with
> > replacement.
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "sebastiandanconia"
> > <sebastiandanconia@> wrote:
> > >
> > > I only offer this as a consideration when using such testing,
> not as a
> > > criticism of Monte Carlo Simulations. A subtle but significant
> point
> > > (IMO) when using MCS: They may or may not be applicable to
> > > trading/investing, because the markets don't always behave
> randomly.
> > >
> > > An example of when a MCS would clearly be appropriate: Let's
> say you're
> > > a defense contractor manufacturing a part for the International
> Space
> > > Station. The part is critical, but because of limitations in
> > > engineering technology it has a high failure rate, and there's
> no way of
> > > forecasting in advance if a part will fail. However, although
> the
> > > failure rate is high, it's also very consistent. Until
> technology
> > > advances sufficiently the only practical solution is to keep
> plenty of
> > > spares on-hand.
> > >
> > > A MCS could tell you what the optimal number of spares to keep
> on-hand
> > > would be. The part failures are random, but MC could tell you
> the
> > > likelihood of two, three, five, ten, etc., consecutive
> failures. You
> > > might determine that there would only be a 1/100,000 chance that
> 6
> > > spares in a row would fail, so you might advise NASA to stock at
> least 6
> > > spares at all times.
> > >
> > > Some trading systems, though, will be successful because they
> take
> > > advantage of repeating sequences of events, not random events.
> Business
> > > cycles go through a specific sequence, company growth follows a
> certain
> > > pattern from infancy to maturity, price trends/reversals follow a
> > > sequence, etc. If trades based on reliable, repeating patterns
> are
> > > taken out of order by a MCS such that a massive drawdown or a
> > > bankrupting series of losers occurs, that can distort the value
> of the
> > > trading method by putting the trades in an order that wouldn't
> occur.
> > >
> > > Soapbox alert!:) Another reason that "Why does it work?" is
> such an
> > > important question with trading systems, since a good answer to
> that
> > > question can lead to a good answer for another important
> question, "When
> > > WON'T it work?"
> > >
> > >
> > > S.
> >
>
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