statistical arbitrage team leo, ying, yandong, xing
TRANSCRIPT
Statistical Arbitrage Team
Leo, Ying, Yandong, Xing
Agenda
• DebuggingSorry to disappoint, but that’s all we did…
Data
• Prices regenerated using CRSP’s adjusted returns
– Match Yahoo Finance prices for 5-6 randomly picked stocks– Several small consistency checks
» Input from all group members
• Want to match the 2 ways of computing prices– Almost there…
PCA Issues
• Preliminary experiment– Get minimum/maximum/mean volatility– Get sum of weights in the portfolios
• Debug the PCA code– What are the value ranges?– Include volatility in the calculation?– Portfolio weights should always add to one
PCA Eigenvector Weight Sums
Volatility
Volatility Histogram
Fig. 3 Experiment Comparison
50 100 150 200 250-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
Market Cap Weighted Portfolio
Eigen Portfolio
Mar-3-6 May-30-6 Aug-23-6 Nov-16-6 Feb-15-7 May-14-7 Aug-8-7-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6w/ norm, w/ /std
accu
mu
la
ted
retu
rn
Pape
r’sCu
rren
tPr
evio
us
With and Without dividing by Volatility
Mar-3-6 May-30-6 Aug-23-6 Nov-16-6 Feb-15-7 May-14-7 Aug-8-7-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7w/ norm, w/o /std
accu
mu
la
ted
retu
rn
Mar-3-6 May-30-6 Aug-23-6 Nov-16-6 Feb-15-7 May-14-7 Aug-8-7-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6w/ norm, w/ /std
accu
mu
la
ted
retu
rn
With
Div.
Vol
atilit
yW
ithou
t Div.
Vol
atilit
y
PNL – Paper’s x Our ResultsPa
per’s
Our
s
PNL – Current x Previous Results
0 500 1000 1500 2000 2500
1
1.02
1.04
1.06
1.08
1.1
1.12
x 108 Fund Value
day
Dollars
Jan 02 1997
Jan 02 2007Prev
ious
Curr
ent
0 500 1000 1500 2000 2500
1
1.02
1.04
1.06
1.08
1.1
1.12
x 108 Fund Value
day
Dollars
Jan 02 1997
Jan 02 2007
PNL – Paper’s x Our ResultsPa
per’s
Curr
ent
Prev
ious
Trading – Debugging Plan• Debug!• Add transaction costs• Make sure it is market neutral• Compute Sharpe ratio• Display positions• Debug with “deterministic” dummy ETF/stock• Signals
– Are they generated correctly?• Merge experiments in single code base
ETFs – Action Plan
• We’ve started matching Stock with ETF– Using GICS as proxy
• Built dictionary• Only part of the Stocks have GICS code
– About ~1/2 of the securities
– Use another proxy (NAICS/SIC)?• Change Simulations to incorporate ETFs
– Straightforward once the rest is working
Suggestions?