Re:TikTokers Are Trading Stocks by Copying What Members of C...
by bo1024 on Tuesday September 21, 2021 @10:13PM
(#28612445)
I think the most interesting question is how you can tell if someone is actually good vs fluctuations due to luck. I'd think it takes a long time to get statistical significance. Or, during a bull run the optimistic traders all look great for a while, but this later proves illusory.
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Re:TikTokers Are Trading Stocks by Copying What Members of C...
by duedillyio on Tuesday September 21, 2021 @10:48PM
(#28612633)
Truly. There's some standard approaches like beta-adjusting that can be done to put things on equal footing in different market regimes but it's only one part of what determines a stock's performance.
Testing for the significance of someone's average returns for example often can be rules of thumb. For example, given a return stream of a trading strategy, the Sharpe ratio (mean return/vol) is directly related to the t-stat of the mean return being different than 0 (mean ret / (vol/sqrt(n)). Several simplifying assumptions must be made about the distributions of returns that don't line up with reality to do the above but it's mostly a heuristic that will let you say "ah, the Sharpe is X over the last 5 years? That's significantly different enough than 0 for it to be tradeable."
Re:TikTokers Are Trading Stocks by Copying What Members of C...
by Galanwe on Tuesday September 21, 2021 @10:35PM
(#28612551)
You just summarized the main problem of quantitative finance: you need points to assert statistical significance. And thus why data providers with long history are paid so much.