Consider the seven major currency pairs, sampled hourly over the last six months. We calculate the pairwise Pearson correlation coefficients to determine the degree with which each pair “moves” together: Values near one or negative one indicate high correlation, values with lower absolute value less so. Positive values indicate movement in the same direction; negative […]

# Category: econometrics

## machine learning in FOREX (part one: establishing a performance baseline)

Introduction We’ve been applying machine learning to FOREX price prediction. The performance of our models varies widely, so to establish a baseline we created a simple linear regression model with which we can compare performance of more sophisticated models against. What We Are Trying To Do Given a time-series of 26 four-hour price samples, we […]

## Emily’s laws of system complexity

First Law For every reduction, there is a greater and opposite clusterfuck. Second Law The first law is a reductionist statement.

## autocorrelation in FOREX

To inform the construction of a machine learning-based price prediction algorithm, we want to understand how many lags prove statistically significant with regard to autocorrelation in the seven major FOREX pairs. So we first choose 10,000 random time points between January 1, 2000 and January 1, 2017 for each of the seven pairs. Then we […]

## summary of our FOREX experiments and next steps

We started by building a support vector machine model based on features used in harmonic trading, with the idea that ideal “harmonic” ratios can be learned rather than explicitly specified. This worked on testing sets but not when we started trading with it. We abandoned the model before we realized that we need to manage […]

## applying market basket analysis to the stock market

I’ve started learning market basket analysis and decided to test drive my knowledge against the stock market: I own a (proprietary) database of predicted stock causality relationships. An export to tabular form looks something like this: I won’t tell you what the “causality” is, as that is the proprietary part, and the example data shown […]

## pseudo-harmonic FOREX prediction with machine learning (part one)

“Harmonic” trading methods seek patterns in the relationships between neighboring peaks and valleys in the time series. Particularly, harmonic traders seek pre-specified ratios in the price differences among a series of peaks and valleys. For example, a trader might observe the following pattern: Let A, B, C, D, and E be the points in the […]

## picking stocks by graph database (part 2: machine learning)

In our last post, we demonstrated a graph database created to enable study of the stock market, particularly the study of causality relationships. So how to proceed from there? At this stage we want to pick winning stocks, not write an academic paper, so our focus turns toward practical machine learning. Source Data We start […]

## picking stocks by graph database (part one)

Historical stock price data comes readily available at daily resolution. So we calculated the Granger causality for each pair of stocks we hold data for, at one and two day lags (testing the question “does daily percent change in volume for stock X Granger cause daily percent change in adjusted close price for stock Y?”). […]

## church to bar ratio, by U.S. county (3rd edition)

Church to bar ratio by county from U.S. Census Bureau data: The brighter the color, the higher the church to bar ratio. Counties missing data necessary for the computation are shown in black. Method From the 2013 County Business Patterns data published at http://www.census.gov/econ/cbp/download/, I extracted the number of establishments in each county that have […]