> Eugene, your comment goes to the need to have sufficiently large backtest > database relative to the number of adjustable parameters, so that the results > are statistically significant. How does that relate to potential > non-stationarity of parameters?
The non-stationarity of parameters is a problem, indeed. However, some things are more or less absolute. Think of the supply/demand relationship. If you can capture its essence in the strategy, that should work today, tomorrow, and 10 years in the future. Now, I do acknowledge that a better model would be the one which not only accounts for the supply/demand, but also for its changing elasticity over time. However, such model would be more complex, more difficult to understand, and more time-consuming to test. Perhaps more importantly, while the supply/demand law by itself is quite intuitive, the manner in which its parameters change overtime is not intuitive at all. The best we can hope for in our walk-forward optimization is that whatever parameters were the "optimal" in a recent period would still be the optimal in the next period. For the sake of this hope, we would be required to significantly shorten our optimization periods, thus incurring a penalty of standard error in our confidence bands. -- You received this message because you are subscribed to the Google Groups "JBookTrader" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/jbooktrader?hl=en.
