In direct comparisons to existing market experts and quantitative mutual funds, our system’s trading return of 8.50% outperformed well-known trading experts. Through our research, we discovered that stocks partitioned by Sectors were most predictable in measures of Closeness, Mean Squared Error (MSE) score of 0.1954, predicted Directional Accuracy of 71.18% and a Simulated Trading return of 8.50% (compared to 5.62% for the S&P 500 index). We approach this line of research using textual representation and statistical machine learning methods on financial news articles partitioned by similar industry and sector groupings. We examine the problem of discrete stock price prediction using a synthesis of linguistic, financial and statistical techniques to create the Arizona Financial Text System (AZFinText).The research within this paper seeks to contribute to the AZFinText system by comparing AZFinText’s predictions against existing quantitative funds and human stock pricing experts. Figure 1 shows an example of this technique Note in particular the use of different envelopes for cycles of differing lengths. Hurst's approach involved the drawing of smoothed envelopes around price to aid in cycle identification. The earliest reference to trading bands I have come across in technical literature is in The Profit Magic of Stock Transaction Timing author J.M. It is the action of prices near the edges of the envelope that we are particularly interested in. Trading bands are lines plotted in and around the price structure to form an ''envelope". But before we begin, we need a definition of what we are dealing with. Armed with this information, an intelligent investor can make buy and sell decisions by using indicators to confirm price action. What they do is answer the perennial question of whether prices are high or low on a relative basis. Trading bands are one of the most powerful concepts available to the technically based investor, but they do not, as is commonly believed, give absolute buy and sell signals based on price touching the bands. How do trading bands work? Bollinger, of Bollinger Bands fame, explains how. Trading bands can forewarn whether to buy or sell by using indicators to confirm price action. It's not the newest of ideas, but as John Bollinger of Bollinger Capital Management points out, it's one of the most powerful concepts available to the technically based investor, answering not whether absolute buy and sell signals are being given but whether prices are high or low on a relative basis. Trading bands, which are lines plotted in and around the price structure to form an envelope, are the action of prices near the edges of the envelope that we are interested in. © 2015 Igor Tulchinsky et al., WorldQuant Virtual Research Center. Finding Alphas is the detailed, informative guide you need to start designing robust, successful alphas. Use WebSim® to experiment and create more successful alphas. Understand the key technical aspects of alpha design. Learn the seven habits of highly effective quants. This book shows you the ins and outs of alpha design, with key insight from experienced practitioners. Alpha is an algorithm which trades financial securities. Further, this book also provides practical guidance for using WorldQuant's online simulation tool WebSim® to get hands-on practice in alpha design. The companion website, features alpha examples with formulas and explanations. You'll learn the dos and don'ts of information research, fundamental analysis, statistical arbitrage, alpha diversity, and more, and then delve into more advanced areas and more complex designs. A collection of essays provides diverse viewpoints to show the similarities, as well as unique approaches, to alpha design, covering a wide variety of topics, ranging from abstract theory to concrete technical aspects. Equally applicable across regions, this practical guide provides you with methods for uncovering the hidden signals in your data. Written by experienced practitioners from WorldQuant, including its founder and CEO Igor Tulchinsky, this book provides detailed insight into the alchemic art of generating trading signals, and gives you access to the tools you need to practice and explore. Finding Alphas seeks to teach you how to do one thing and do it well: design alphas. Design more successful trading systems with this practical guide to identifying alphas.
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