Hands-On Machine Learning for Algorithmic Trading

A single alpha factor from market data

We are first going to illustrate the zipline alpha factor research workflow in an offline environment. In particular, we will develop and test a simple mean-reversion factor that measures how much recent performance has deviated from the historical average. Short-term reversal is a common strategy that takes advantage of the weakly predictive pattern that stock price increases are likely to mean-revert back down over horizons from less than a minute to one month. See the Notebook single_factor_zipline.ipynby for details.

To this end, the factor computes the z-score for the last monthly return relative to the rolling monthly returns over the last year. At this point, we will not place any orders to simply ...