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Investing/Strategies / Mechanical Investing
|Subject: Re: SoWR and New Relative Value Screen||Date: 2/10/2013 5:20 PM|
|Author: JWW2||Number: 241532 of 249248|
A quick answer on parameters. In an earlier version of the screen, I had Negative Values where one might expect positive one. I had -27*ROA where ROA was based on roay1.s percentile rank and -11*CR which was based on curry1.s percentile. My best guess is that a SoWR screen is very similar to multiple regression equation and this screen has a multicollinearty problem. Some of the independant variables are highly correlated and this will cause the tuned parameters to differ fom their expected values even to the extent of sign reversal. So the tuned parameters may be misleading outside of the model, but the descriptive model as a whole, remains valid.
I cannot provide a link right now (Oops! Internet Explorer could not connect to gtr1.backtest.org), and I have guests arriving so I cannot comment further today, but will tomorrow. Thanks for the comments so far.
I would like to hear comments on the above explanation by staticians (or others) on this board.
Happy Chinese New Year!
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