1. News source

Bloomberg, Reuters – the dominant companies that provide financial news They provide APIs – Application Programming Interface that can be directedly programmed.

2. Excel

2.1 Some functions

  • VLOOKUP()
  • STDEV.P()
  • STDEV.S()
  • CORREL()
  • MMULT() – Need to press Crtl + Shift + Enter

2.2 Generate correlated stock price pridections

2.2.1 Cholesky decomposition

\[ \begin{pmatrix} 1 & 0 \\ \rho & sqrt(1-\rho^2) \end{pmatrix} \]

2.2.2 Procedures

1). Calculate the std and correlation of the returns(ln(Pt/Pt-1)) of two stocks. Note that: we use return here rather than actual prices so that the correlation will not be denominated by the stock with large prices

2). Generate two columns of random numbers using NORM.INV(RAND(),0,1)

3). Multiply the random numbers by the Cholesky decomposition matrix

4). Multiply the results by the std of corresponding stocks

5). Convert the returns using the current price to generate the first predictions and use the predictions to generate further predictions

3. Other points

Adjusted close price: adjusted for dividends, share buybacks…