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March 16th, 2009, 08:32 AM   #1
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Chi Squared Question

I am trying model some price data. I have decided that I think that the model should be a mean reversion one, with 1 deterministic term and a random term.

I run a simulation that gives me a normally distributed number, I stick that into my model, and it gives me 3000 randomly generated prices. I want to compare that to my actual data and see if I am using the right model..

I think the Chi-Squared test is most appropriate for this... Am I right?
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March 17th, 2009, 06:14 AM   #2
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Re: Chi Squared Question

Yes.
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March 17th, 2009, 03:05 PM   #3
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Re: Chi Squared Question

One problem I am having however, is that I hear the Chi squared distribution is only good when your data values are generally greater than 5. Since mine are returns, they are rarely greater than 1... Any suggesitons?
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March 18th, 2009, 10:14 AM   #4
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Re: Chi Squared Question

Maybe you should have mentioned that above!

Can you give some examples?
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March 18th, 2009, 10:37 AM   #5
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Re: Chi Squared Question

Well my data points are differences in the percent change of two price returns... so most of them are from -.4 to 4.
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