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March 16th, 2009, 08:32 AM  #1 
Newbie Joined: Mar 2009 Posts: 3 Thanks: 0  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 ChiSquared test is most appropriate for this... Am I right? 
March 17th, 2009, 06:14 AM  #2 
Global Moderator Joined: Nov 2006 From: UTC 5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms  Re: Chi Squared Question
Yes.

March 17th, 2009, 03:05 PM  #3 
Newbie Joined: Mar 2009 Posts: 3 Thanks: 0  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?

March 18th, 2009, 10:14 AM  #4 
Global Moderator Joined: Nov 2006 From: UTC 5 Posts: 16,046 Thanks: 938 Math Focus: Number theory, computational mathematics, combinatorics, FOM, symbolic logic, TCS, algorithms  Re: Chi Squared Question
Maybe you should have mentioned that above! Can you give some examples? 
March 18th, 2009, 10:37 AM  #5 
Newbie Joined: Mar 2009 Posts: 3 Thanks: 0  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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