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[amibroker] Re: Margin of Error



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Are you calculating the significance of observed vs. expected
frequencies using the chi-square test as Merrill did? If so, I'd
calculate it over the entire segment... the only benefit I see to
breaking the data into subsets would be if you want to see how the
p-value has changed over time. 

--- In amibroker@xxxxxxxxxxxxxxx, "brian.z123" <brian.z123@xxx> wrote:
>
> The question is:
> 
> If I have 10 years of data and that provides 500 Monday samples for 
> a Calender Effect study would the margin for error be less or more 
> if I tested the sample in one segment (500 trades) or undertook 5 
> tests with 100 samples and then combined the results in some way?
> 
> If so, what is the best way to use the 5 samples to get the 
> population outcomes.
> 
> No offence taken if you are too busy to answer.
> 
> 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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