tag:blogger.com,1999:blog-1346045313195961352.post2394813398699900309..comments2019-03-05T04:03:32.081-08:00Comments on MatlabTrading: Estimating the fair price of ETF componentsAnonymoushttp://www.blogger.com/profile/10662229147968940872noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1346045313195961352.post-20912209017461285992010-05-31T09:06:28.995-07:002010-05-31T09:06:28.995-07:00Indeed, looking at the chart I've thought abou...Indeed, looking at the chart I've thought about the momentum strategy, but for now I'm still focusing on a mean-reverter for this one.<br />The reason for this: if you do a linear regresson y=beta*x+alpha , where y = stock return and x-etf return (for each bar), the offset factor alpha is incredibly small compared to beta. A momentum strategy would be based on this alpha, while a mean reverter works with beta. Beta should also be stable in time as opposed to alpha.sjevhttps://www.blogger.com/profile/17452562180989360928noreply@blogger.comtag:blogger.com,1999:blog-1346045313195961352.post-58582297785888253552010-05-31T07:21:02.029-07:002010-05-31T07:21:02.029-07:00Nice. I agree, points to a number of strategies ...Nice. I agree, points to a number of strategies (assuming the above pattern holds true historically and beyond), amongst them:<br /><br />- observing that undeperformers and overperformers tend to have momentum in their respective directions (short spread or long spread to ETF)<br /><br />- various portfolio based approaches where one tries to outperform the ETF over a period, spread to ETFJonathan Shorehttps://www.blogger.com/profile/08858453641392256663noreply@blogger.com