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Quantitative Finance · Glossaire

Qu'est-ce que « Mean-reversion speed filter » ?

Definition 3.3 Strategies I: Equities and Futures · Chapitre 3 — Residual and Principal-Component Stat Arb

A mean-reversion speed filter trades a stock’s s-score only when its fitted mean-reversion speed is high enough that the reversion is expected well within the estimation window; Avellaneda and Lee required κ>252/30=8.4\kappa > 252/30 = 8.4, a mean-reversion time under half the sixty-day window (0<b<0.96720 < b < 0.9672).

The sector-index s-score book with a planted mean-reverting share of 0.3. Left: Sharpe ratio against the entry threshold. Right: net Sharpe ratio against the speed filter’s largest allowed mean-reversion time (30 days is Avellaneda and Lee’s); labels give the percentage of fits kept. Data: s1_residarb.run.
Figure 3.1. The sector-index s-score book with a planted mean-reverting share of 0.3. Left: Sharpe ratio against the entry threshold. Right: net Sharpe ratio against the speed filter’s largest allowed mean-reversion time (30 days is Avellaneda and Lee’s); labels give the percentage of fits kept. Data: s1_residarb.run.
One synthetic stock’s s-score (against its sector index, not centred) over a year, with the entry thresholds dashed; the step line is the position (up long, down short, drawn at ± 2.6). Data: s1_residarb.path.
Figure 3.2. One synthetic stock’s s-score (against its sector index, not centred) over a year, with the entry thresholds dashed; the step line is the position (up long, down short, drawn at ±2.6\pm 2.6). Data: s1_residarb.path.
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