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Couldn't you phrase a strategy as a time series of binary decisions, e.g., of the type "buy/sell stock X at current time: yes or no"? Then the inverse would be
by kleiba 7y ago
Couldn't you phrase a strategy as a time series of binary decisions, e.g., of the type "buy/sell stock X at current time: yes or no"?
Then the inverse would be obvious. However, it's not immediately clear to me whether the claim holds that an inverse thus defined would perform better than the original strategy.
- jakelazaroff 7y agoDoes that work for the "no"s? I didn't buy or sell any stock yesterday; with that definition of "inverse", wouldn't I have to perform all possible actions? For any time, stock and amount, the inverse of inaction would be "yes, buy/sell X shares of stock Y."
- kleiba 7y agoIt wouldn't work because you don't have an unlimited amount of money. So it's impossible to turn all "no's" into "yes" for the inverse strategy. In addition, buying/selling is not a binary action per se for stocks because you need to specify an amount.
- squeaky-clean 7y agoYeah there's just way too many possible ways to consider an inverse strategy. Even with your example, if my strategy is to buy GOOG at noon on Monday... Is my inverse strategy to buy 1 of every stock that isn't GOOG at Noon on Monday? Is the inverse to short GOOG? Is it to have already owned GOOG and instead sell it at Noon on Monday?