I have met a surprising number of people who have tried to build a trading algorithm at some point. Here is why you should not waste your time with that. First of all, I have to admit: I do it, too. For a long time stock markets have been endlessly fascinating to me, and I … Continue reading Why you should not try to predict stock markets
Stock market crisis: is there a tennis ball effect?
Stock markets are plummeting as the Corona virus has turned into a global pandemic. During the short periods of recovery one can hear those stock market reporters on TV talking about a tennis ball effect. The idea is that what goes down has to come up again and vice versa. So should you wait for … Continue reading Stock market crisis: is there a tennis ball effect?
Something is wrong with realized volatility
If you own stocks of a company, how big is the risk to lose at least 5 percent of your money tomorrow? To answer that question, you need to know the variance of that stock. The problem with stock market variances is that they change a lot over time. They are very high in times … Continue reading Something is wrong with realized volatility
The Case Against Seasonal Unit Roots
There are several ways to model seasonality in a time series. Traditionally, trend-cycle decomposition such as the Holt-Winters procedure has been very popular. Also, until today applied researchers often try to account for seasonality by using seasonal dummy variables. But of course, in a stochastic process it seems unreasonable to assume that seasonal effects are … Continue reading The Case Against Seasonal Unit Roots