The importance of adaptive strategies

16Sep10

To shed light on the importance of adaptive methods, we show 3 charts here. These show the next day average %returns for different periods. On the X axis, we show the day of the week. 1 means Monday, 5 represents Friday.
Overall, Friday’s next day (that is Mondays) %returns are bearish.
However, there are 2 year periods (quite a long regime from 2004 to 2005), when Fridays were bullish.
After viewing it, does somebody question the validity of adaptive methods?
To emphasize its seriousness even more, I would contend that every non adaptive trading algorithm is like a dud; a dead bomb that haven’t exploded yet. Once it will blow up for sure, but you don’t see the timer and you don’t know when.

Average daily %return distribution from 1998 to 2010.

Average daily %return distribution from 2000 to 2005.

Average daily %return distribution from 2004 to 2005.

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