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Hachann
14 avr. 2021 21:05

Kolmogorov-Smirnov Test 

Apple Inc.NASDAQ

Description

The Kolmogorov–Smirnov test aims to tell you if the distribution of prices (or log returns) tends to follow a normal distribution or not. You can read about this test on Wikipedia. It seems to be a basic but trusted measure in the quantitative trading world.

When KS-t columns are blue, then it's safe to assume normal distribution. When they are red, the normal distribution assumption is proven wrong by the magnitude of the KS-t value.

In the plotting tab of the script, you can activate another option that displays the probability of the distribution being actually normal. It's values are bounded between 0 and 1, like all probabilities.

This test can be useful when using statistical concepts for trading markets, like standard deviations, z-scores, etc because they all depend on the assumption of prices (or log returns) being normaly distributed.

If you see something wrong, don't hesitate to message me.

Happy trading to all.
Commentaires
RicardoSantos
interesting, altho i think its not correct, look at the implementation in rust:
github.com/daithiocrualaoich/kolmogorov_smirnov/blob/master/src/test.rs

further reading:
daithiocrualaoich.github.io/kolmogorov_smirnov/
Hachann
@RicardoSantos, hello and thank you for your remarks. It seems that the first link you provided is about the Two-Sample KS-test, but my attempt here is about the One-Sample KS-test, as it tries to compare the observed cumulative distribution function with its specified theoretical distribution. The second link seems to be a nice read, that I've yet to begin ;)
RicardoSantos
@Hachann, perhaps, i was expecting output to be 0<KS<1 but i may just be overthinking it or mixing it up with the rejection probability :) anyways thank you for sharing it
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