Tag Archives: mean reversion
Another look at autocorrelation in the S&P 500
Casting doubt on the possibility of mean reversion in the S&P 500 lately. Previously A look at volatility estimates in “The mystery of volatility estimates from daily versus monthly returns” led to considering the possibility of autocorrelation in the returns. I estimated an AR(1) model through time and added a naive confidence interval to the … Continue reading
Posted in Quant finance, R language
Tagged autocorrelation, mean reversion, S&P 500, variance compression
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The mean reversion of Groundhog Day
February 2nd is Groundhog Day. If Punxsutawney Phil sees his shadow, then he goes back into his burrow and hibernates for six more weeks. Otherwise he predicts an early spring. It is really a mean reversion idea — current good weather means bad weather later, and vice versa. The other Groundhog Day Most people outside … Continue reading
The tightrope of the random walk
We’re really interested in markets, but we’ll start with a series of coin tosses. If the coin lands heads, then we go up one; if it lands tails, we go down one. Figure 1: A coin toss path.Figure 1 is the result of one thousand coin flips. It is a random walk. The R command … Continue reading
