Friday, November 20, 2015

Grimes, Quantitative Analysis of Market Data: A Primer

Adam Grimes’s brief book, Quantitative Analysis of Market Data (only 35 pages of text), which kindleunlimited subscribers can read for free, is indeed a primer. He starts with the formulas for percent return, both simple and logarithmic, and shows how we can standardize these returns for volatility, using ATRs, historical volatility, or the standard deviation spike tool (measuring each day’s return as a standard deviation of the past 20 days’ returns). He describes normal distribution, running mean, and running median for Cauchy-distributed random numbers.

The bulk of the book consists of an explanation of “three simple tools that should be part of every trader’s tool kit: bin analysis, linear regression, and Monte Carlo modeling.”

Traders who are familiar with the most rudimentary mathematical principles of finance will learn nothing from this book. But it’s a good place for the mathematically uneducated to start and a quick review for those whose grip on statistical modeling is tenuous.

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