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eeng


Total Posts: 21
Joined: Dec 2014
 
Posted: 2018-10-03 09:23
I am trying to approximate the returns of asset A by means of a linear combination of other assets A'=a*B0+b*B1+c*B2....

I have this quite figured out but I'm not sure what a good metric for goodness of fit would be, so far I am only considering relative error (e=(rA-rA')/rA), and I'm concerned with distortions when rA is close to 0.

What would a better metric could be? Ideally it would penalize sign errors more than absolue value errors (ie, it is worse that rA' is +ve when rA is -ve).

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