Kicking Off the Free Finance Project: Free Pairs Trading Software!

In order to kick off the Free Finance project, I've released a tutorial to guide interested parties through the creation of a statistical arbitrage screener. You can use it to analyze stocks and determine pairs that could be viable candidates for statistical arbitrage. The script works by running an Augemented Dickey-Fuller test, one of the tests for cointegration, the measure primarily used to determine whether two stocks tend to move together in time.

In order to run the script, you will need Finatica, which can be downloaded for free. The code for the screener is available at Free Finance.

Ernie Chan, Quant Trading Wizard, Backing Up SVMs?

Today Ernie Chan, who has previously been unenthused by using machine learning algorithms in trading strategies, reports on a new study by UC Berkeley that affirms the ability of support vector machines to predict markets in a statistically significant fashion using technical indicators.

http://epchan.blogspot.com/2010/10/data-mining-and-artificial-intelligence.html

As it happens, I have long been a huge SVM advocate, and believe that due to the intuitions underlying their design they are clearly the superior nonlinear regression tool, and should find a wide variety of commercial usages. Finatica provides an environment in which you can use SVMs, among a wide variety of other tools, to develop, backtest and deploy trading strategies. If you want to harness the power of SVMs quickly without a whole bunch of hassle, Finatica is the perfect choice for you. And, a free version is available!

Make sure to enter the code "JVDBLOG" for 50% off the registered version of Finatica.