Market Model Thingy

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For just sell? I think what he's saying is that if you're trading based on knowledge gathered during day 1 and day n, you need to compute returns between day n+1 and day n+2 instead of day n and day n+1 or even day n and day n+2. You should definitely not do the latter (n and n+2) if you're not normalizing the return.

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I'm not sure which of the above CMI is referring to, but I agree with this.

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Yeah, I did return of (n+2)/n, which did seem a bit odd. I misunderstood what you were saying (obv at this point its pretty clear that just about any assumption regarding somebackground knowledge would be too much!). I redid it with (n+2)/(n+1), again, it went down but still with results that appear to be above the upward trend of the test market over the time period. (though, all of the additions Ive made make me a lot less certain that there isnt some error happening along the way)


Assuming that the test stat is now (n+2)/(n+1) instead of (n+1)/n, I *think* the data set could be retrained, with the obejective stat changed from (n+1)/n to (n+2)/(n+1). (ie. change the test from "given x,y,z on day n, what is an estimate for how the stock will change by close tomorrow" to "given this info, how will the stock change from close on n+1 to n+2") Is this correct, or is it making an assumption I ought not to make?

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that would definitely be a reasonable thing to do. one thing to look for (in terms of how believable the model is as something other than data mining) is how much the coefficients on the various explanatory variables change when you change the specification of the model in that way.

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Also, semi off topic, but if this sort of thing were to be done using intraday minute by minute data, how would these additions work there?

For example, if you've decided to buy or sell at time n, is there a reasonable way to estimate a good real life price that you would actually get? Im assuming Im asking for just about an impossible task, but any input would be gladly appreciated.

Perhaps something like "average of mean low and mean close for minutes n+1 to n+10" for selling, and "average of mean high and mean close for minutes n+1 to n+10"

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in general, i think create position at t, trade at t+1, exit at t+2 is a fairly reasonable model for any timestep delta t, in that you wouldn't want to be creating positions more often than you could trade, though i guess this could break down when you get to very small intervals.