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rudolf stricker wrote:
>
>Jeff et al,
>
>thank you for pointing me to this article.
>
>On Fri, 22 Feb 2002 10:55:07 -0800 (PST), you wrote:
>
>>See the following pages at John Conover's site...
>>he just posteed these within the last week or so.
>>There's a lot of math used to derive his results, but
>>feel free to skip to the "examples" given on these
>>pages. The main point is that if you are interested
>>in computing "risk", the normality assumption will
>>severely underestimate your risk.
>>
>>http://www.johncon.com/john/correspondence/020213233852.26478.html
>
>But as far as I can see, it deals not with my subject above, but
>rather with the bet size problem, where of course _the details_ of
>the probability distribution (like eg tail volume etc) become most
>important.
>
Yes, I was only addressing the "risk" aspect of your posting.
>The topic I tried to address is more basic. In (my) simple words:
>Which given discreet (price) time series is well suited to derive
>appropriate trading actions? What "necessary condition" has to be
>fulfilled by a time series to be the basis for a successful trading
>system? What may be a convenient measure to define this "tradeability"
>of a time series? And as can be seen from my subject, "information
>frequency" imo is a relevant parameter here.
>
>Because this calculation procedure is rather simple, everyone who is
>interested in the tradeability of his/her favorite security could
>easily measure it, and I'd like to compare your results with my
>results, eg in terms of
>
> "non-tradeability" = max (stadev (price changes; 1 time step);
> stadev (price changes; 2 time steps))
> / stadev (price changes; 4 time steps)
>
>If this fraction approaches (or even exceeds) 1, the security is
>untradeable for the information frequency at hand, and the only (*)
>way out to make this security tradeable is to increase the information
>frequency. [(*) other measures to be discussed]
>
Hmmm, suppose a stock increases in EOD value 90% of the time. Suppose it
is not very volatile, on any time frame, so then your "non-tradeablity"
parameter is very close to 1. In other words, I think I've constructed
an example were we could care less about StdDev, as long as we've
identified a trend. As a recent, concrete example, take a look
at the price chart for DLX. Very low volatility, identifiable
uptrend. What does your "non-tradeability" parameter turn
out to be for this one?
Jeff
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