Re: Statistical test for equality ?

[stn021]

... I could go on with possible solutions to your problem, but it would be easier if I knew what the actual problem was.

Hi João,

this question is about research in economics. More specifically about forecasts of dynamic systems.

One application could be prediction of stock-prices. This is a good example because there is lots of data available and it is my favourite field for testing models, statistics etc. Stock don't really help with small budgets but they do come in handy when you want to avoid small sample sizes.

So if I want to predict a number of stock-prices I would take data from the past, like for example the price-history of the stock itself, fundamental data of the company, possibly data from related market, in short whatever I assume to be relevant.

That I consider to be "fact", observed data that is taken as it is.

Then I would design some kind of simulation that takes the data from the past and somehow generates a stock-price. Then I would probably wait until tomorrow and compare the generated price with tomorrow's price. If it matches for a large number of stocks then my model is OK, otherwise it is not.

The question is: how do I know that my model is correct? Comparing means and distributions does not really help, that only tells me if my generated data is is in the same area of the coordinate system as my observed data.

With the usual statistical test That I can check if two identical coins were used, that turn up heads or tails at 50% probability.

But that is not the question here. The questions is how to predict one specific flip of one specific coin and to check the prediction.

At the end of the day I would want to know if I should buy a specific stock or not. That means a working simulation is necessary and that simulation has to be checked before actually using it. Otherwise large sample but very small budget.

At first that question seemed simple to me but now it seems like I am caught in some erroneous frequentist system...

THX

stn