by Heger Gabteni, Hubert de La Bruslerie
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Suggested foundations for probability and statistical reasoning and financial time series. Specialist prerequisites vary by paper.
Read the distributions and expectations used in probabilistic arguments.
Interpret expectations after information is observed.
Check whether a relationship can be estimated consistently over time.
Read the fitted relationship and its residuals.
Assess uncertainty rather than treating an estimate as a fact.
Study long-run relationships without confusing them with correlation.
Check the assumptions behind reported estimates.
Move from conditioning and expected values to timed problems with a defensible solution.
Choose a reproducible strategy, specify the trading rule, and test what remains after costs and estimation uncertainty.