4 months late but: "How to handle missing price data? For some of the preferred shares, prices are missing from some dates. Do I replace missing prices with the last observed price?" you could use the bid ask quote instead of the last transaction
1) you could look at taking similar markets but with a smaller % bid/ask spread, eg. FAS as opposed to XLF (nysearca), but that's just a start3) you would probably need to get as many aspects in your favor as possible for it to work.