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The 3 moment CAPM takes into account the mean, variance and skewness of asset returns. An investor prefers high positive skewness and low risk, because this corresponds to higher returns. I also did an experiment with fractional Brownian motion.
3 moment CAPM
The 3 moment CAPM takes into account the mean, variance and skewness of asset returns. An investor prefers high positive skewness and low risk, because this corresponds to higher returns. I also added the probability of positive returns as an optimization parameter. But that still was not selective enough, so I also select stocks that recently dropped in price by a certain amount.
1 2 3 4 5 6 ... S = stats.skew( returns skews.append( S ) pinc = pPos( returns ) pincs.append( pinc ) )
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beforeLastReturn = c[ len( c ) - 2 ] / c[ len( c ) - 3 ] - 1 if beforeLastReturn > -1 * float( argv[1] ) * ev: continue t = file.replace('.csv', ''), ev, madC, S, pinc records.append( t ) ( a,b,residuals ) = fitline( mads, evs ) ( aSkew, bSkew, residuals ) = fitline( mads, skews ) ( aPinc, bPinc, residuals ) = fitline( mads, pincs ) for t in records: symbol, evC, madC, S, pinc = t if evC > a * madC + b: if S > 0 and S > aSkew * madC + bSkew: if pinc > aPinc * madC + bPinc: ...
If you liked this post and are interested in NumPy check out NumPy Beginners Guide by yours truly.