So my understanding is that the more everyone uses this strategy, the more prices of different stocks get correlated (you sell the stock that went up, that drops its price back down), and that reduces your ability to diversify (the challenge becomes in finding uncorrelated assets). But yeah, I’m not a finance person either—just played with this for a few months...
Well if you take simple returns, then the naive mean and std gives (μ,σ). If you use log returns, then you’d get (μ−σ2/2,σ) - which you can use to get μ if you need.
So my understanding is that the more everyone uses this strategy, the more prices of different stocks get correlated (you sell the stock that went up, that drops its price back down), and that reduces your ability to diversify (the challenge becomes in finding uncorrelated assets). But yeah, I’m not a finance person either—just played with this for a few months...
Well if you take simple returns, then the naive mean and std gives (μ,σ). If you use log returns, then you’d get (μ−σ2/2,σ) - which you can use to get μ if you need.