Inverse Statistics – and how to create Gain-Loss Asymmetry plots in R


Asset returns have certain statistical properties, also called stylized facts. Important ones are:

  • Absence of autocorrelation: basically the direction of the return of one day doesn’t tell you anything useful about the direction of the next day.
  • Fat tails: returns are not normal, i.e. there are many more extreme events than there would be if returns were normal.
  • Volatility clustering: basically financial markets exhibit high-volatility and low-volatility regimes.
  • Leverage effect: high-volatility regimes tend to coincide with falling prices and vice versa.

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Learning Data Science: Modelling Basics


Data Science is all about building good models, so let us start by building a very simple model: we want to predict monthly income from age (in a later post we will see that age is indeed a good predictor for income).
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Why R for Data Science – and Not Python!


There are literally hundreds of programming languages out there, e.g. the whole alphabet of one letter programming languages is taken. In the area of data science, there are two big contenders: R and Python. Now, why is this blog about R and not Python?
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