Quantitative Burning the Brain II

The next burning of brain was done by Autogressive models (AR). AR may be invalid if it is not stationary covariance. Stationary covariance means

(1) Time series have constant and finite mean

(2) Time series have constant and finite variance

(3) Time series have constant and finite covariance itself with previous and future time series.

Mean reversion means = b0/ (1 - b1)

But a random walk means a time series equal to the previous + a random variable.

To test for nonstationarity:

1. Plot graphs - check for variation in mean/variance

2. Use AR and check the correlations

3. Use Dickey and Fuller (DF). Take the First Difference and test for correlation g=0. If g=0 Null Hypothesis no reject => unit root / non-stationary.

ARCH(1) - means Autoregressive conditional heteroskedasticity. Horrible name. Burnt another brain cell remembering this ARCH!!! ARCH means error residual's variance serially correlated with the previous error error residual's variance.

Quantitative Burning the Brain

Have been burning my brain learning: MSR, MSE, ANOVA, SSE, SEE, RSS, Heteroskedasticity, Breusch-Pagan, White-corrected, serial correlation, Durbin-watson, Hansen method, multicollinearity,probit, logit, discriminant analysis and now learning AR. Each time I learn, I'll enter into deep sleep. I really think these topics are just burning brain cells. Not sure how long I can last!

Got my Video Disk

After a long wait, my Video Disks from Schweser is ready. I had bought the package in 31 Dec 2009 but managed to collect the Video Disks today. It was a long wait. I found that I needed to watch the video on a proper TV rather than through my computer. Felt funny watching video via computer. Anyway for today I watch the Ethics part. It is similar as L1 which is very boring. Must download it into memory. Six components of the Code: Act with integrity; Integrity above personal, use reasonable care and independent judgement, practice & encourage others towards professionalism, promote integrity, maintain & improve professional conducts.

Standard of Profesionalism: (A) Knowledge of the Law (B) Independence and Objectivity (C) Misrepresentations (D) Misconduct

Standard for Integrity of the Capital Markets: (A) Material non-public (B) Market Manipulation

Started the ball rolling

I’ve started studying based on Schweser materials. Had tried to read the CFAI textbooks but found it very hard to digest. This year, I am not so prepared unlike last year. Business is picking up and foolish investors have started investing even though we had a huge double digit returns on all equity markets last year. Had also completely 100% changed my business model to one of a fee-paying service. So each case takes up so much time. As usual, my health has always been a big burden for me. Nobody can actually pinpoint exactly what’s wrong with me. Maybe it is just in my head!