套利交易的统计意义

bobcat

A question  in my mind, how do you group stocks for long or short? To minimize risks, you would be better to make all portfolio be market neutral, how do you pick what to long and what to short then?  ...
firecs 发表于 2009-7-28 21:49

1） I use market neutral strategies only when I smell a great market risk.

2)  When the risk is moderate, as for most of the time, my strategies do have market bias. Otherwise, the return
would be much lower.

3)  A strong system makes a profit even when the market bias is wrong for the near future, because of strong alpha.

4)  The bias is not based on guessing the future, but is merely based on the market condition for the
most recent past and for the  time being. Thus a good trend cannot be easily missed.

5)  Lower cross correlation is always good. Thus I rarely trade very large stocks.

6)  Regression is used to choose stocks. All stocks in NYSE, AMEX and Nasdaq are evaluated daily.

7)  Systems are carefully evaluated in the so-called walk-forward fashion.

8)  Never use martingale to save a position.

9)  Always give a consideration to the Modified Sharpe Ratio: Total Return/Max Drawdown.
This is a leverage invariant quantity, which in some sense measures the true return of the system.
This is probably my strongest aspect. One year I achieved a value of such ratio around 100. Usually, a range like
3~10 is already considered good. High value of such ratio can only be achieved if one makes many trades each day.

gutu

Great! Thx.