>IMHO spreads need to be used in the calcs for the following reason
>While this is only an experement whats the point if it doesn't reflect real life?
Richard,
I'm not trying to throw cold water on this project at all, but here's my thinking--for what ever it's worth...
IMHO, the process of proving a theory doesn't necessarily have to reflect real-life action. In fact, it's very common in research projects to reduce a complex problem into smaller pieces for the purposes of proving a theory. My opinion is that including the spread, and other factors unnecessarily complicates the project.
It seems to me that if this is to be a fun-type game only, then the way it's set up here is fine. I think, however, there are more efficient ways to prove a theory--if that's the objective.
The approach I would use is 1.) review the literature relative to the theory. 2.) run the theory "on paper" (computer) using existing, easily-available, historical data 3.) then if the theory looks OK in the abstract, try it out in real life.
But even then, I'd try it out in real life first without including the speread and overhead. One reason being that it's possible the process of stock selection and timing is such an overwhelmingly large part of the process that the spread and the overhead could be relatively inconsequential--so much so, that it might not make any appreciable difference in the workings of the the theory. Possibly. :-)
Ice |
