[R-SIG-Finance] statistical remedy needed

[Mark Leeds]

hi TP: I'm not sure of the best approach. To me, it would seem like,
if the returns
to the benchmark are auto-correlated ( which causes any  portfolio
tracking it to
have returns that are correlated ), then, if you subtract them each
period, that should remove the autocorrelation. I would create the
paired difference series and do the Box-Leung test again because I
don't think you should be getting correlated returns on the
differences. Good luck.





On Fri, Jul 8, 2011 at 8:38 AM, tonyp <petrovaa at gmail.com> wrote:
> Thanks for the reply, Mark and Andy. The reason I am using the paired t-test
> is that I am comparing top 10% top performance of a benchmark and the
> benchmark itself, therefore, the confounder is the benchmark per se. Correct
> me if I am wrong! So if you think that I still should use the simple t-test
> in this case as you say I am using the Welch one due to the high p-value
> significance of the variance homogeneity test. Again, thanks for the quick
> feedback guys.
>
> TP
>
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