Questions tagged [mean-reversion]
A mean reverting process is a process that, over time, tends to drift toward its long-term mean.
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Model for MEan Reversion [closed]
I am a newbie. I need to test mean reversion in a really volatile asset which had went a lot in the last years (a Crypto). Which model would you suggest?
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How to estimate the Mean reversion
I am looking for some insights and worked-out example on how exactly should I estimate the Mean reversion parameter of the One factor Hull White model
This link suggests to fit some regression ...
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What factors determine performance of mean-reversion strategy? What is the role of volatility?
I assume that P&L of mean-reversion strategy should depend on several factors. One important factor is optimal timing (optimal entry/exit points to open/close positions). This is quite intuitive. ...
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Is it possible to discretize OU with a more general AR(p) / ARMA (p,q) models?
The discrete analogue of an OU process is a simple AR(1) model. More general AR(p) or ARMA(p,q) models can also be regarded as discrete analogues of an OU process? If so, which coefficients describe ...
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What are best models to predict mean-reverting processes?
Surprisingly to me, I could not find any paper in the literature that discusses methods to predict a mean-reverting process. What are the best models to predict mean-reverting processes? Would also ...
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Is there any advantage of constructing generalized (group) pairs trading strategy over ordinary pairs trading strategy?
Ordinary pairs trading is when we find asset (e.g., stock) $A$ and $B$ which prices are cointegrated. On the other hand, generalized (grouped) pairs trading strategy implies that we find cointegration ...
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Mean reversion factor logic
I have a hard time understanding the caveats of mean reversion factor logic.
Let's imagine a mean reverting process:
$$
dx_t = θ(μ−x_t)dt+e_t
$$
Where θ is the "mean reversion" coefficient, ...
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How find optimal entry/exit thresholds for a mean-reverting process?
Suppose we have $\{X_{t}\}$ mean-reverting process. The goal is to find optimal entry and exit thresholds which can maximize P&L of the trading strategy. I have 2 "empirical" approaches ...
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Why does AR(1) model with a small coefficient exhibit faster mean-reversion than one with a greater coefficient (when |$\beta$|<1)? [closed]
Suppose we have two mean-reverting AR(1) models, given by
$$X_{t}=\beta X_{t-1}+\epsilon_t,$$
where $|\beta|<1$.
How fast series reverts to its mean is determined by the coefficient $\beta$. As far ...
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Modeling mean-reversion for different volatility regimes
Motivation: Half-life (HL) period shows how long it takes for a mean-reverting process to return halfway to its mean after a deviation. Most commonly, an Ornstein–Uhlenbeck (OU) process is applied to ...
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Interpretation and intuition behind half-life of a mean reverting process
I am struggling to understand the intuition and use of half-life period of a mean reverting process. According to definition, half-life period shows how long it takes for a time series to return ...
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What is the common accepted/ best performed method to classify trends and mean-reversion for fixed peroid?
I have knew some strategies only work on trends peroid, and other only works on mean-reversion peroid. But I didn't find how to classify trends and mean-reversion.
I wonder the best performed/verified ...
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Price spread or ratio for mean reversion pair trading
I am slightly confused as to whether I should use price spread or ratio for mean reversion in pair trading. I have seen some work on testing stationarity for the price spread and then use the price ...
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portfolio weights based on past returns
In the academic paper Industries and Stock Return Reversals by Hameed and Mian (JFQA,2015) (see picture below), the authors describe a trading strategy based on reversal, which essentially buys past ...
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Setting up kalman filter on basket of multiple securities which are cointegrated
I want to use mean reversion trading strategy.
I am able to find 3 stocks which are cointegrated on closing prices at daily level. Im curious on what's the trading strategy using kalman filter.
I can ...
