Markets: A Rigorous Course

M15 · Problem 2 ★★ Check

What seven trades can say

The seven signals of 15.1.7 had net R-multiples 0.018,0.011,−0.952,−1.156,−1.005,−0.242,1.8710.018, 0.011, -0.952, -1.156, -1.005, -0.242, 1.871. (a) Compute the sample mean, the sample standard deviation (divisor N−1N-1) and the tt-statistic for H0:E=0H_0: E = 0. (b) Suppose the true process has E=0.30RE = 0.30R and s=1.36Rs = 1.36R (the breakout system of M03 · 3.1.1). How many trades are needed for t≥2t \ge 2 in expectation, and for an 80% probability of t≥2t \ge 2? (c) The scan produced seven signals in 17 months. How many years would the 80%-power sample take at that rate? What changes to the research design would shorten it, and what new problems does each change bring?

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