Infantino’s PCA Model, 2010

Revision for “Infantino’s PCA Model, 2010” created on November 25, 2015 @ 17:33:02

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Infantino’s PCA Model, 2010
This model, from a large group of stocks e.g., S&amp;P 500, computes, using <a class="ext-link" href="http://en.wikipedia.org/wiki/Principal_component_analysis"><span class="icon">​</span>Principal Component Analysis</a>, the common factors that drive stock returns and filters out noises. We can then estimate the short term expected returns for each individual stock, hence a trading decision.

Moreover, the model proposes a way to use intraday volatility to estimate which of the two regimes we are in –
<ul>
<li>mean-reversion, or</li>
<li>momentum</li>
</ul>
Combining the estimated expected returns with the regime indicator, we do mean-reversion when the intraday volatility is small, and trend following when the intraday volatility is big.

&nbsp;
<h1 id="References">References</h1>
<ul>
<li><a class="ext-link" href="http://dspace.mit.edu/handle/1721.1/59122"><span class="icon">​</span>Developing high-frequency equities trading models</a></li>
</ul>
<h1 id="Code">Code</h1>
<ul>
<li><a href="http://redmine.numericalmethod.com/projects/public/repository/svn-algoquant/show/core/src/main/java/com/numericalmethod/algoquant/model/infantino2010" target="_blank">http://redmine.numericalmethod.com/projects/public/repository/svn-algoquant/show/core/src/main/java/com/numericalmethod/algoquant/model/infantino2010</a></li>
</ul>



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