The Axiomatic Trader: Latent Regularity, Information Budgets, and the Canonical Form of a Quantitative Investment System

Systematic trading rests on one article of faith: that regularities found in the past persist. We state it as a time-invariant mechanism driven by an unobserved latent state, and show that it leaves a researcher five constants to declare — the recurrence bound $Lambda$ at a block length $b$, the invariance defect $epsilo{n}_0$ of the representation it is declared of, the coherence times $el{l}_i$ of the state’s coordinates, the signal ceiling $rho$ and the fraction $kappa$ of it contingent on the regime — after which the architecture of a correct quantitative investment system is nearly forced.