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