Re: stat measures


kaferro@xxxxxxxxxxx wrote:
> I am designing a system to test some basic investing ideas, such as
> what happens after a 10% market drop or four down days in a row.

LOL! You're just trying to re-invent wheels that have long proved
to be BROKEN?

> A famous author suggested that one should test a trading idea with a
> study that:
> 1. enumerates all observations of what happened after a defined market
> event over a specific period of time;
> 2. weighs whether the results indicate a random phenomenon or a
> tradable anomaly;
> 3. measures the uncertainty associated with the later conclusion; and
> 4. predicts the probability that an x-percent move will follow the
> event being studied.
>
> Can you suggest the statistical measures for #2,#3, and #4.

Only ONE such author? I thought there had been hundreds of them.
Some of them laugh all the way to the bank not for their winning
strategies, but for having enough suckers buying their books! :-)

Yes. P(you win) - P(you loss) = 0.5. For all 3, that is of
course ignoring transaction cost.

Use you money (and save time) to buy a monkey, and train it to
throw darts at the stocks page to pick the stocks for you. It
has a higher probablity of success because the monkey doesn't
know and doesn't care of the PAST of the stock prices or events
to predict the future.

I have
> begun to study statistics. In the meantime, though, since I am
> currently writing the program, your suggestions will allow me to code
> the stats now as I continue the process of learning about statistics in
> general.

You can program a digital monkey. But it's much simpler just to print
out 0.5 (or "unpredictable" for the probability-humber challenged).

> Thank you

You're welcome. Don't thank me, but thank those at the U. of Chicago
who had spent DECADES solving both the theoretical and empirical
problems relating to your questions, proving empirically that the
rules (in books) based on hindsight are completely useless for
predicting future prices, at any given present time.

-- Bob.

.

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