121–123 of 123 posts
I think this would be the paper behind his algorithm: http://crab.rutgers.edu/~dhong/Papers/fBm2014.pdf
Find non-diversified asset pools based on mutual information of prices. Avoid too much exposure to any pocket, but do arbitrage within a pocket.
Earlier quoted context omitted.
I had a b-school class do a similar exercise, in the context of the debate between passively and actively managed funds. Everyone in the class was asked to stand up, pull out a coin and flip it. If you flipped tails you sat down. Then the remaining students flipped again, repeating until there was only one person left standing. At which point the professor "interviewed" the student, asking what her method was and how…
I like the exercise. But from a practical pedagogical standpoint (in the unlikely scenario I ever teach a class probability or survivor bias), what would be a safe point to stop the flipping? 3 students left standing? 2? What if all of the students still standing all flip tails simultaneously?
Maybe you'd weight it based on class size? 4 left isn't bad in a class of 100, but it's a bit high in a class of 10.
Earlier quoted context omitted.
> an average of Does this exclude outliers? What's the median duration?
Even though "average" is a statistically non-rigorous term, we should be out of the "5-15 second maximum " holding times mentioned by GP by at least one order of magnitude.
Another disclaimer, the markets I'm quoting these averages from are the ES and ZB.