Using weather as a trading signal

It's the studies that are profitable after transaction costs, hindsight bias, and cross-validation that are not published :)

> I've always wondered why assumptions about transaction costs and execution speed never show up in these kinds of "studies". Anyone who has participated in markets understands they have a significant impact on results.

I would guess because transaction costs don't play any real part in the theory. If we only paid attention to papers that turned a profit after transaction costs, we might miss great theoretical ideas to build on.

That said, I'm neither an academic nor a competent investor, so feel free to ignore that thought.

This does take into account commission, see here: https://www.quantopian.com/help#ide-commission

I wanted to use the longest time period possible, and this was the most info I could find about forecasted cloud coverage in NYC in the past 10 years or so. It's also worth noting that this is just an example, the paper it's based off of is more in-depth. Unfortunately they concluded that transaction costs made trading based off of this strategy almost not worth it, but the main point here is that it's interesting.

In practice, trading costs are very steep, and a single trading signal is almost never enough to exceed them, but multiple signals can be combined to make a decision while costs stay the same. For an individual signal study like this, a no-costs assumption can be useful to see if it has any predictive value on its own.