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PickStock Description
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PickStock
(copyright 2003, Bell Software and Services, Inc.) uses principal
components analysis to search out potentially underpriced
stocks by analyzing a user-supplied database of historical
stock prices.
The program is believed to be an implementation
of what is known in the financial market modeling community
as 'arbitrage pricing theory' (see for example S. Ross, 'The
arbitrage theory of capital asset pricing', J. Economic Theory,
vol. 13, pp. 341-360, 1976). The theory postulates that a
given vector of prices (for example, today's price for a
set of stocks) can be explained by a linear combination of
underlying economic components. While there is apparently
substantial debate in the economic community as to the viability
of the arbitrage pricing theory, this application provides
a tool to test it out on real data.
Who can best make use of this application:
It is hoped that any user who can download stock price data
into MetaStock text format will find PickStock sufficiently
easy to use. Facility in handling text files and importing
them into spreadsheets is also a plus. Economists and stock
analysts may be able to utilize the program along with a more
traditional analysis of economic fundamentals. Scientists,
engineers, and students may even be able to tap into the powerful
principal components analysis engine that PickStock incorporates
by replacing closing prices with arbitrary data (ie. a given
'date' can be associated with one experiment having outputs
for each of the 'tickers' with the output values corresponding
to the ticker being in the 'close' field).
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