|
PureBytes Links
Trading Reference Links
|
--- Mark Jurik <mark@xxxxxxxxxxxx> wrote:
> I've grouped and rearranged all my responses into one posting:
> It's not the absolute value that's the problem, but the nonlinear
> interaction between the apples and oranges. To take an extreme
> example, suppose you are applying it to a stock whose trading range
> for the month hovers between $5 and $20. The time series at the $20
> level needs to behave for more efficiently than at the $5 level just
> to get the same PFE value, and that's the problem. As price gets even
> smaller, efficiency is biased upward, eventually converging to PFE =
> N/(N-1), an efficiency greater than 1, regardless of what the price
> action is doing!
>
> In the other direction, if you take the limit of the PFE algorithm as
> price becomes very large relative to the bar count, the formula
> converges to the Kaufman efficiency ratio (KER). In other words,
> removing the constants from PFE gives you KER, which is scale
> invariant. KER very cleanly and correctly compares actual price
> action against ideal price action. But neither KER or PFE is really
> analyzing the fractal nature of the time series. They are simply
> comparing the total price excursion of two trends, one real and one
> ideal.
thanks for the explanation....explains why r/s analysis is such a power
tool.
> >> i think a better approach would be to derive the "static" hurst
> exponent for whatever market or time frame we trade,<<
>
> Yes. But it's not trivial to calculate. The only software I now
> that provides the Hurst exponent is by Bloomberg. Any others?
yes, quite a few, not counting compiled programs in matlab or
mathematica. i was surprised. but none are "real time" like in
bloomberg. however, with intel processing power approaching 1 Gz, a
dual processor workstation might make a real time hurst exponent
indicator doable in the very near future.
TJ
|