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Comments for Author Review of "On a fundamental statistical edge principle" The manuscript "On a fundamental statistical edge principle" provides a significant contribution to the field of quantitative finance by presenting a thorough theoretical framework for enhancing trading strategies through the use of self-generated historical trading information (HTI). The authors argue convincingly that leveraging HTI is a necessary condition for establishing a statistical edge in trading practices. The introduction lays a strong foundation by establishing the importance of HTI in constructing profitable trading strategies and setting the stage for the ensuing discussions. The paper proceeds to establish a theoretical basis for why any trading strategy that does not use its own HTI is inherently suboptimal, and how a strategy that does exploit HTI can consistently outperform it. Moreover, the paper does well to address the real-world implications of the proposed principles, suggesting how these can be applied in actual trading scenarios and highlighting the potential for developing more sophisticated trading strategies that are in tune with the mechanics of financial instruments. The authors have clearly identified the relevance of their research by not only focusing on the theoretical model but also discussing its practical applications in the real world and future lines of research, thus presenting a comprehensive view of its utility. While the paper is impressive in its current form, its practical applicability could be further enhanced by including performance analysis or results from paper trading, as well as a thorough estimation of transactional costs such as turnover. These additions would provide practitioners with a more tangible demonstration of the strategy's efficacy and potential for implementation in a live market environment. In conclusion, the paper is a commendable effort that lays down a theoretical foundation for exploiting historical trading information to achieve a statistical edge. It successfully bridges the gap between theoretical models and practical trading strategies, making it a valuable read for both academics and practitioners in the field of finance. I am impressed by the research contribution and recommend its publication.
I would like to thank the anonymous insightful reviewer for his constructive criticism, and, in case he reads this, I hope he gets in contact with me so I can express personally my gratitude (and possibly start a scientific collaboration).
