Problem with AR model?

AI & Machine learning
1

Course Name: Financial Time Series Analysis for Trading, Section No: 14, Unit No: 3, Unit type: Notebook

https://i.imgur.com/PgW5vMM.png

Hello, why we multiply tomorrow signal for today's return? Predictions are already shifted, so we only must multiply current signal * current return to obtain today strategy return. Please check this.

2

Hey Daniel,



We compares today's prediction with yesterday's prediction and decide whether to buy or sell based on that comparison. 



But while caluclating returns we are not using predictions, we are using the actual price change on that day (wheat_returns). We can calculate the strategy returns of a day by multiplying the signal generated on the previous day with the change in close price on the current day. Hence, we multiply yesterday's signal with today's return to calculate the strategy returns.





Thanks

Rushda

3

You're right. Sometimes this kind of logic it's kind of tricky.



Thanks!

4

Glad i could help :slight_smile: