Discussion of article "Econometric Approach to Analysis of Charts" - page 3

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denkir:

alsu, I agree that the Laplace distribution always has an excess ratio of 3. I was hasty with its estimation, because I haven't seen it for a long time... But once again I repeat that econometricians in the field of research I wrote about use these distributions. If Nobel laureates are not authorities for you (e.g. Robert Engel), then I will pass.

If you do not give a concrete analytical example, I consider the argument speculative.

Please, here are the returns of the first instrument I came across on the first lag (the picture, it should be noted, is identical on all instruments I came across and lags from 1 minute to 1 week):

If anyone, even a Nobel laureate, starts to prove to me that this is a Cauchy or normal distribution, I am sorry, but after that I will consider him just an illiterate upstart.

 

Denis, I would still like to hear an answer to my question regarding the interpretation of the criterion - I can't understand from the article whether the conclusions drawn from the tests are correct.

// I would question the validity of the application of the Ljung-Box itself. Of course, most of the books I have seen say that it remains valid even for non-normal distributions, but I have never seen any proof of it. I suppose the primary source has it, but I never came across the works of Ljung and Box, so I always kept this question on my mind. The essence of my doubts is that LB uses chi-square distribution, which, as we know, is tied to normality and independence. In the case of the quotation series, neither of these is observed, which means that the application of this criterion looks very complicated.

Therefore, I would like to ask you if you have any calculations that prove that the Ljung-Box criterion is applicable to series where the conditions of independence of neighbouring returns and normality of their distribution are not essentially fulfilled. Personally, until I see the calculations, I would be cautious about using this criterion. By the way, I am extremely surprised that Mr Engle is not a billionaire yet.

 

"Econometric approach to analysing charts" - the title is a bit strange :)

We are not analysing charts, but time series of quotes.

 
alsu:

question for the author of the article.

You interpret the Lewing-Box test as follows (quote):

The correct interpretation according to the definition of the criterion should be this:

The actual question. Is the above from the category of "misspoken" or is it a miscalculation in the interpretation of the test results?

Oops, more likely the second. I repent, sprinkle my head with ashes and apologise profoundly :-)))) I made a mistake in the holiday rush... I wrote the code before the holidays... I interpreted it after... and I interpreted a completely different test written in Matlab... alsu, THANK YOU FOR NOTICE!

Made changes to the article, hope to post soon.

 
denkir:


Made changes to the article, hope to post soon.

The article has been updated.
 
-Alexey-:


1) Each coefficient is determined using a different amount of data, i.e. they are not statistically significant. Therefore, each coefficient must be tested for significance separately from the others. This is not the case in the Ljung-Box test.

Please clarify, I don't quite understand which coefficient. The specifics of the Q-test are described in the article, as revised.

2) The significance level for the test is chosen on the basis of what - just like that?

Rather on the basis of the fact that it is a universally popular value of 0.05. If you want to use a different one, you can replace the value of the variable in the script. 

double alpha[3]={0.05,0.05,0.05};
This approach is just a terrible overloading with a great loss of information. What is there to predict then? In the language of mathematics it is called fitting data to the forecasting method. But this is not the way to do it. The method can be used only if the initial data are acceptable for it, and not to cut them so that they become so. This is a well-known problem of modern statistics.

And you wanted to get everything on a platter? It doesn't work that way. Something has to be sacrificed.

Yields are also forecasted. And then after the forecast they are converted into absolute price values. I am going to write about this in the next article.

 
-Alexey-:

Here is a concrete not analytical, but a practical example on the current Euro situation at 4 hours. Distribution on a number of residuals, which I get by other transformations, and I know why. You can see that the distribution is close to triangular.


This is not an example, it's a clipping from context.

Without initial data and formulas, on the basis of which you obtained the residuals and your distribution, I have no right to evaluate it.

...And its shape can change in the most bizarre way, because this series is non-stationary. Where do you get the idea that price series are distributed according to the

the normal distribution, the Student distribution and the Cauchy distribution.
- that's just nonsense, it's practically very rare. Perhaps you are talking about something else and I just didn't understand you.

-Alexey-, I recommend you to read the article again. There you will see that it is not the series itself that is estimated, but the series of returns. This is about stationarity.

The article about distributions was written for introductory purposes as an example of the characteristics of a financial series, or rather a series of returns. You can also write an article on this topic here.

 
alsu:

Please, here you are, here is a picture of the first instrument I came across on the first lag (the picture, it should be noted, is identical on all instruments I came across and lags from 1 minute to 1 week):

If anyone, even a Nobel laureate, starts to prove to me that this is a Cauchy or normal distribution, I'm sorry, but after that I will consider him just an illiterate upstart.

alsu, I see that you've worked in Statistica. But you need the raw data. What returns and what formula did you use to get them?

I assume that we are talking about different derivatives of the price series. So I would not hurry to throw a stone into the Nobel laureates' garden :-))))

 
lea:

"An Econometric Approach to Graph Analysis" is a slightly odd title :)

We are not analysing charts, but time series of quotes.

Yes, I like the other variant better too. This is a consensus variant of the name. However, we see quotes on a chart. When analysing charts, we analyse time series of quotes...
 
lea:

"An Econometric Approach to Graph Analysis" is a slightly odd title :)

We are not analysing charts, but time series of quotes.

Doesn't the title of the article reflect its content?
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