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macrocephalopod

@macrocephalopod

Paul Allen, Vice President M&A, Pierce & Pierce (Sie/Hir) | Vegan | Silence is Violence | Women’s Rights Are Human Rights | ACAB (Assigned Cephalopod At Birth)

Joined December 2020

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    1. macrocephalopod‏ @macrocephalopod 12 Mar 2021

      Here's a quick primer on how to build a quant reversion strategy. First step is to find a price series that looks like it may have some reverting behaviour -- this is a random stock I found that looks reasonable but you could use an ETF, currency, whatever really.pic.twitter.com/dTYMeWhQ61

      13 replies 42 retweets 327 likes
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    2. macrocephalopod‏ @macrocephalopod 12 Mar 2021

      Don't want to over complicate it so let's look at a crossover of two moving averages with speeds N and 2*N -- when the fast average is above the slow one we go short, and when below we go long. Plotting the Sharpe ratio as a function of EMA speed shows a nice peak at ~7 days.pic.twitter.com/DOn7j147JQ

      2 replies 0 retweets 29 likes
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    3. macrocephalopod‏ @macrocephalopod 12 Mar 2021

      Obviously you should do some parameter averaging, e.g. you could compute the signal using various speeds from 5-15 days and average the positions over each parameter choice, to make the strategy robust.

      1 reply 0 retweets 19 likes
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    4. macrocephalopod‏ @macrocephalopod 12 Mar 2021

      This is just an example so I'll use the 7 day moving avg. Chart below shows performance of this strategy. Need to remember that we picked the best parameter in-sample plus there will be transaction costs so real world performance will not be this good, but it looks promising!pic.twitter.com/ZgmfUymkwV

      1 reply 0 retweets 20 likes
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    5. macrocephalopod‏ @macrocephalopod 12 Mar 2021

      With some additional robustness checks and careful implementation of a simulator for fill prices, commissions etc you are well on your way to launching your first quant strategy.

      1 reply 0 retweets 22 likes
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    6. macrocephalopod‏ @macrocephalopod 12 Mar 2021

      Only problem is that the price series is one I generated using 100% random noise, it is completely unpredictable by any signal. Congratulations, you now know how to overfit a backtest. Welcome to quant research.

      30 replies 11 retweets 348 likes
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    7. Till Festenberg‏ @TFestenberg 13 Mar 2021
      Replying to @macrocephalopod

      To find a trajectory that displays some "reverting behavior", you have probably generated Brownian sample paths until you obtained a suitable one. But then it was not "generated using 100% random noise, it is completely unpredictable by any signal."

      1 reply 0 retweets 4 likes
    8. macrocephalopod‏ @macrocephalopod 13 Mar 2021
      Replying to @TFestenberg

      I could have found a signal that “works” for *any* randomly generated series (eg momentum, some kind of technical analysis, didn’t need to be reversion). But yes, conditional on wanting to find a working rev signal, I needed to generate a few paths until I found a reverty one.

      1 reply 0 retweets 5 likes
      macrocephalopod‏ @macrocephalopod 13 Mar 2021
      Replying to @macrocephalopod @TFestenberg

      I think this is made pretty clear by the sentence “the first step is to find a price series that looks like it may have some reverting behaviour”.

      4:55 AM - 13 Mar 2021
      • 1 Like
      • Robert Martin
      1 reply 0 retweets 1 like
        1. macrocephalopod‏ @macrocephalopod 13 Mar 2021
          Replying to @macrocephalopod @TFestenberg

          But obviously the post needs a certain level of deception for the reveal to work!

          0 replies 0 retweets 2 likes
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