Quantitative Trading, 2nd Edition

APPENDIXA Quick Survey of MATLAB

MATLAB is a general-purpose software package developed by Mathworks, Inc., which is used by many institutional quantitative researchers and traders as their platform for backtesting, particularly those who work in statistical arbitrage. In Chapter 3, I introduced this platform and compared its pros and cons with some other alternatives. Most of the strategy examples in this book are written in MATLAB. Many of those strategies are portfolio-trading strategies involving hundreds of stocks that are very difficult to backtest in Excel. Here, I will provide a quick survey of MATLAB for those traders who are unfamiliar with the language, so they can see if it is worthwhile for them to invest in acquiring and learning to use this platform for their own backtesting.

MATLAB is not only a programming language; it is also an integrated development platform that includes a very user-friendly program editor and debugger. It is an interpreted language, meaning that it’s similar to Visual Basic, but unlike a conventional programming language like C, it does not need to be compiled before it can be run. Yet it is much more flexible and powerful for backtesting than using Excel or Visual Basic because of the large number of built-in functions useful for mathematical computations, and because it is an array-processing language that is specially designed to make computations on arrays (i.e., vectors or matrices) simply and quickly. In particular, many loops that ...