Ernie Chan and Trading Systems and Methords books are best resources to learn mean reversion quant strategies with Matlab
I am looking mean reversion strategies and see how it can be applied within Matlab for my basic system. Learn more here on the components.
I have come to the conclusion that:
1. Ernie Chan’s set of books are excellent set of resources for this. They also include Matlab source code which covers a lot of scenarios.
2 PJ Kaufman’s book on Trading System and Methods has lots of example of mean reversion strategies.
I think these are adequate resource to implement into this system. I will post some videos on these so stay tuned
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Some sample source and spreadsheets from Trading System and Methods:
spreadsheet, TSM Commodity Channel Index HPQ
Use the ARIMA confi dence bands to determine overbought/oversold levels
…..along with a single 0.20 smoothing, a double smoothing, and a single error correction.
The error correction positions the trendline in the middle of the price move and may be
a good candidate for mean reversion trading….
spreadsheet TSM Comparison of exponentials MSFT
A mean-reverting (fading) strategy can be created by trading when the excess kurtosis
crosses above zero, indicating an excessive move, then trading the opposite way
indicated by the skew. Volatility will also be important. The rules for mean reverting are:
• Buy when the excess kurtosis crosses above 0, skew < 0, and volatility > minimum level.
• Sell when excess kurtosis crosses below 0, skew > 0, and volatility > minimum level.
program TSM Kurtosis and TSM Skewness
program TSM VIX Connors
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