Post #2719 by elann on the Mechanical Investing board

Investment Strategies / Mechanical Investing

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I hope either Elan or Jim or any other expert can help me this question.
My question is that while calculating RS126-2sd, the slope is calculated using the log prices of the stock for last 6 months. Do I need to annualize the slope, since the 2*price volatility is annualized to subtract from the Slope?
Thanks in advance,

I don't think it makes sense to annualize a slope. Let's say you calculated the linear return slope on an annual chart. The slope you find would be the annual return. Now let's say you cut that chart in half, looking only at the first six months, or at the last six months. The slope of the line on the half year chart would not change. It would still represent the annualized return.

Elan

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