Steve Mayo Legend  Posts: 414 Joined: 10/11/2012 Location: Austin, TX  User Profile | This is getting off topic, but I wanted to caution against some of the comments herein. This "shifting one day" analysis is called "Rolling Returns." It's a good way to see what the potential return might have been over any x-day period within a range, but it's not good for calculating mean and standard deviation. The reason is that it repeatedly uses the same central dates over and over each time. For example, if 15-Oct was an outlier, it will be in every rolling return you are calculating. The proper analysis method is to use bootstrapping with replacement in a Monte Carlo, which is what I was showing above. That sampling method creates a normal distribution; therefore the moments of that distribution (mean, standard deviation, skew, kurtosis, etc.) are accurate (at least within the confines of the historic data). Calculating those moments with samples that are not independent (e.g., the rolling returns) can be highly misleading. [Edited by Steve Mayo on 11/17/2014 2:09 PM] | |
