Quant Mashup
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Momentum Strategy, Value Strategy and Trading Calendar Updates [CXO Advisory]
We have updated the the monthly asset class momentum winners and associated performance data at Momentum Strategy. We have updated the Trading Calendar to incorporate data for May 2015.
- 7 hours ago, 29 May 2015, 04:40pm -
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Five Myths About Data-Mining Bias [Price Action Lab]
Data-mining is widely used nowadays for trading algo development. There are several myths about how to deal with data-mining bias. This blog exposes five such myths. What is data-mining bias? At the highest level, data-mining bias results from testing multiple hypotheses on historical data. As the
- 17 hours ago, 29 May 2015, 06:42am -
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Chapter 4 - The Risk Parity and All Seasons Portfolios [Meb Faber]
This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and I'll send you a free copy. -- "I know that there are good and bad environments for all asset classes. And I know that in one's lifetime, there will
- 20 hours ago, 29 May 2015, 03:48am -
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List of Funds or Trading Firms Using Artificial Intelligence or Machine Learning [Robust Tech House]
The following are the list of funds or trading firms using artificial intelligence or machine learning for their research and trading purposes. There are probably a lot more than this but many prefer to stay very quiet. The list and info here is compiled from public sources amongst the links
- 20 hours ago, 29 May 2015, 03:48am -
1
Financial Real Time Data in Client Side Javascript [John Orford]
Few people that work in the financial world actually live in the now. Some live at the last month end; others at 't-1'. Only silicon, mad men and chattering Tweeters live on the edge. Following on from the Flow and Statelessness post, I used Lazy.js, a CORS proxy and the Markit On Demand
- 20 hours ago, 29 May 2015, 03:13am -
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What has Worked in June [Quintuitive]
Time to start looking at the next month. Let’s start with the top five performing futures (ordered by winning percentage): Future Total Months Winning Months Mean Return Median Return 30-Year Bond 37 68% (25) 9.62% 1.57% Canadian Dollar 37 68% (25) 0.07% 0.53% 10-Year Note 32 63% (20) 9.46% 1.45%
- 1 day ago, 28 May 2015, 04:55pm -
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Basic Factor Analysis: Simple Tools to Understand What Drives Performance [Alpha Architect]
Investors should know what they are buying and why they are buying it. Unfortunately, more often than not, investment products are jammed down the throats of unsuspecting victims who are either ignorant, easy to influence, and/or don’t really care. We highlighted an extreme example of this in the
- 1 day ago, 28 May 2015, 12:48pm -
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Momentum Environments [Systematic Relative Strength]
How consistent are Momentum returns? This is among the most frequently asked questions about Momentum (and about any investment strategy for that matter). One way to answer this question is to look at the following table from a white paper published by RBC Capital Markets. According to their
- 1 day ago, 28 May 2015, 12:47pm -
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SPX Iron Condor - High Loss Threshold - 80 DTE [DTR Trading]
This post looks at a standard (STD) one-lot iron condor on the S&P 500 Index (SPX), initiated at 80 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester. For background on the setup for the backtests, as well as the
- 1 day ago, 28 May 2015, 12:47pm -
1
Amazing paper related to several momentum strategies [Quantpedia]
#2 - Asset Class Momentum - Rotational System #3 - Sector Momentum - Rotational System #8 - FX Momentum #14 - Momentum Effect in Stocks #15 - Momentum Effect in Country Equity Indexes Authors: Geczy, Samonov Title: 215 Years of Global Multi-Asset Momentum: 1800-2014 (Equities, Sectors, Currencies,
- 1 day ago, 28 May 2015, 07:27am -
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Using Leadership Index to Time S&P 500 [Systematic Investor]
To install Systematic Investor Toolbox (SIT) please visit About page. Following is code and plots used in RFinance 2015 presentation. We will use a C++ function to compute Lagged Correlations from the Run Leadership Rcpp post. First, let’s load historical prices for S&P 500. Please note that
- 1 day ago, 28 May 2015, 01:41am -
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A Statistical Interpretation of Black Scholes [John Orford]
I love the tingling sensation when some new idea or revelation becomes clear. Perhaps not 100% clear, but you get close enough that you can almost taste it. That happened to me when I read about the Pythagorean interpretation of special relativity. Nice to understand 20th century physics first in
- 1 day ago, 28 May 2015, 01:40am -
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Moved Quantscript to GitHub [Quintuitive]
Quantscript is an old project of mine, which was hosted on google.code. Since google.code is shutting down, I had to either scrap it or migrate it to GitHub. I am not using this code on a daily basis anymore, and since the project is relatively small – the natural thing would have been to scrap
- 1 day ago, 28 May 2015, 01:40am -
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[Academic Paper] Uncovering Trend Rules [@Quantivity]
Uncovering Trend Rules
- 2 days ago, 27 May 2015, 08:41pm -
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ETF Sector Rotation – Ideas from readers [Alvarez Quant Trading]
The post ETF Sector Rotation generated some good ideas on what to try differently. This post will focus on two ideas on the Select Sector SPDR ETFs. The next post will look at two ideas using Fidelity sector mutual funds. ETF Universe These tests will use the Select Sector SPDR ETFs. The list is
- 2 days ago, 27 May 2015, 01:23pm -
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Using the Price-to-Book Ratio [Investor's Field Guide]
Having explored the history of the price-to-book ratio, we can now turn to its usefulness as a stock selection criterion. The data suggests a few important points about the price-to-book ratio: It has worked quite nicely in small-cap It has not worked as well in large-cap stocks Price-to-book
- 2 days ago, 27 May 2015, 01:22pm -
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Risk-Managed Momentum Outperforms [Larry Swedroe]
Momentum has been found to be a persistent and pervasive factor in the returns not only of stocks, but of other asset classes (including bonds, commodities and currencies). Compared with the market, value and size risk factors, momentum in equities has earned both the highest premium and the highest
- 2 days ago, 27 May 2015, 01:21pm -
2
SPX After Quick Drops From 50-day Highs [Quantifiable Edges]
The study below is one I have shown here on the blog for a long time. It looks at relatively sharp selloffs from intermediate-term highs. It shows that there has been a strong tendency for situations like the current one to bounce. Results are updated. The stats all suggest an upside edge over the
- 2 days ago, 27 May 2015, 09:26am -
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Weekly Commentary –  The 60/40 Forecast: 0% through 2025 [Flirting with Models]
Benjamin Graham, father of value investing, once said: “in the short run, the market is like a voting machine but in the long run, it is a weighing machine.” The psychology factor that can dominate market returns and volatility in the short-run is often washed out in long-run annualized returns,
- 2 days ago, 27 May 2015, 03:47am -
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A Breakout To Nowhere [Dana Lyons]
We’ve spent a good deal of “ink” over the past few months on the trendless, range-bound action that has characterized the U.S. stock market recently. This trading range has been, after all, the dominant factor in the equity market. And an epic, even record-setting, trading range it has been.
- 2 days ago, 27 May 2015, 03:46am -
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Good News Bonds, Bad News Bonds [Jay On The Markets]
First the (potential) good news. The (potential) good news is that one trend in bonds that I wrote about a while back here and here may finally (potentially) be playing out the “right way.” Although, as there are still three more trading days left in the month of May, it is clearly a little
- 2 days ago, 27 May 2015, 03:46am -
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Global Tactical Asset Allocation: Just the Facts [GestaltU]
Rob Seawright of Above the Market recently posted an article broadly skewering tactical asset allocation (TAA) strategies. He cites the failure of market gurus to pick market turns (from a CXO analysis we've discussed in the past), and a Morningstar study showing that TAA has under-performed
- 3 days ago, 26 May 2015, 01:08pm -
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Fooled by Persisting Market Conditions [Price Action Lab]
This blog is related to the previous blog on the RSI(2) but also conveys a much more general message about the impact of persisting market conditions and how they can fool trading system developers. In the case of the RSI(2) it was the lack of serial correlation after the 1980s that contributed to
- 3 days ago, 26 May 2015, 01:07pm -
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Daily Academic Alpha: High Lobby Efforts Equal Alpha? [Alpha Architect]
Corporate Lobbying and Firm Performance Corporate lobbying activities are designed to influence legislators, regulators and courts, presumably to encourage favorable policies and/or outcomes. In dollar terms, corporate lobbying expenditures are typically one or even two orders of magnitude larger
- 3 days ago, 26 May 2015, 01:07pm -
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New related paper to #6 & #7 - Volatility Effect in Stocks and #20 - Volatility Risk Premium Effect [Quantpedia]
#6 - Volatility Effect in Stocks - Long-Short Version #7 - Volatility Effect in Stocks - Long-Only Version #20 - Volatility Risk Premium Effect Authors: Ilmanen Title: Do Financial Markets Reward Buying or Selling Insurance and Lottery Tickets? Link:
- 3 days ago, 26 May 2015, 01:07pm -
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China up 50% in 3 months. Mixed EM historical record after similar momentum $FXI [@NautilusCap]
China up 50% in 3 months. Mixed EM historical record after similar momentum $FXI
- 3 days ago, 26 May 2015, 01:06pm -
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Development of Intermarket Trading Systems [System Trader Success]
In my past article, Intermarket Is Fundamentally Sound, I covered some of the basic premises and history of intermarket trading systems. While the previous entry was more theoretical, this article is more practical. Indeed, I will be discussing how intermarket analysis can be used to generate
- 4 days ago, 25 May 2015, 12:58pm -
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Building Algorithmic Trading Systems for the Forex market. Part 2: Where to look [Mechanical Forex]
On my last post we discussed the first step necessary to become a successful algorithmic trader: to get a solid formation in statistics and programming. Once you’re done with this step you will then need to confront the problem of building profitable trading strategies to trade the currency
- 4 days ago, 25 May 2015, 12:57pm -
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SPX Iron Condor - High Loss Threshold - 66 DTE [DTR Trading]
This post looks at a standard (STD) one-lot iron condor on the S&P 500 Index (SPX), initiated at 66 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester. For background on the setup for the backtests, as well as the
- 4 days ago, 25 May 2015, 12:57pm -
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Accounting for Data Mining Bias [Dekalog Blog]
I've recently subscribed to this forexfactory thread, which is about using machine learning to develop trading systems, and the subject of data mining/data dredging has come up. This post is a short description of how mining/dredging can be accounted for, but readers should be aware that the
- 4 days ago, 25 May 2015, 01:57am -
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Why Steady Vol Works [John Orford]
Contrary to what people say every now and again, history never ends. Not like humans end with a monotonous beep out of a heart monitor. Life goes on, hearts keep thumping. When I was an English teacher in Germany. One of my students showed up for the first day of class. She was unemployed and the
- 5 days ago, 24 May 2015, 05:41am -
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Two-Period RSI Versus a Two-Day Losing Streak [Price Action Lab]
The RSI indicator has served as the foundation of several popular short-term trading strategies over the years mainly due to its popularity. In the article I compare the results of a basic system based on a two-period RSI to those of a system that is based on a two-day losing streak. Larry Connors
- 6 days ago, 23 May 2015, 08:29pm -
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Small Cap Volatility Hitting Historic Lows [Dana Lyons]
If it feels like the stock market hasn’t moved in a few days, you’re not imagining things. With the long weekend approaching, it seems as though Wall Streeters (or their robots) packed up and departed for the mythological “Hamptons” days ago. As it pertains to the small caps, as represented
- 6 days ago, 23 May 2015, 06:34am -
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ATAA Conference Trip Report [Alvarez Quant Trading]
I am back from the Australian Technical Analysis Association meeting in the Gold Coast, Australia. I had a great time meeting readers of the blog and other traders. Lots of good presentations. My favorites include those by Alan Clement and Andrew Gibbs, which provided me with new research ideas.
- 6 days ago, 23 May 2015, 06:14am -
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Narrowest SPX 6 month range in 10 years $SPX $SPY [@NautilusCap]
Narrowest SPX 6 month range in 10 years $SPX $SPY
- 6 days ago, 23 May 2015, 06:13am -
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Week after Memorial Day holiday pretty bullish $SPX $SPY [@NautilusCap]
Week after Memorial Day holiday pretty bullish $SPX $SPY
- 6 days ago, 23 May 2015, 06:13am -
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visNetwork, Currencies, and Minimum Spanning Trees [Timely Portfolio]
Just because I’m ignorant doesn’t mean I won’t try things. Feel free to correct any ignorance that follows. More than anything I would like to feature the new htmlwidget visNetwork. I thought the example from Minimum Spanning Trees in R applied to currency data (similar to this research paper
- 6 days ago, 23 May 2015, 06:12am -
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[Academic Paper] Regulating Greed Over Time [@Quantivity]
Regulating Greed Over Time
- 1 week ago, 22 May 2015, 08:06pm -
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Andrew Swanscott Interviewed me at Better System Trader (and Quantocracy readers liked it!) [Quantifiable Edges]
Need something to listen to on your Memorial Day weekend car trip? Can’t bear to be without the markets for 3 days? Check Andrew Swanscott’s interview with me at his great new site, Better System Trader. It was published just a few days ago and joins a growing list of excellent podcasts that
- 1 week ago, 22 May 2015, 09:30am -
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Dow Divergences Part 3: The Double Dose [Dana Lyons]
Today, we wrap up our mini-series on divergences among the Dow Jones indices. In previous installments, we learned that large negative divergences on the part of the Dow Jones Transportation Average (DJT) versus the Dow Jones Industrial Average (DJIA) were largely overrated. Of course, that is
- 1 week ago, 22 May 2015, 03:25am -
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Wanting for the 1% decline [Statistical Ideas]
A 1% decline is -to some degree- an arbitrary level. But it's a small enough level that we typically see the markets fall on a later date by at least this amount, from any given or current day's intraday high. For this "chronically up" market, May 11 was the last time this
- 1 week ago, 22 May 2015, 03:25am -
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New related paper to #237 - Dispersion Trading [Quantpedia]
#237 - Dispersion Trading Authors: Deng Title: Volatility Dispersion Trading Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1156620 Abstract: This papers studies an options trading strategy known as dispersion strategy to investigate the apparent risk premium for bearing correlation risk
- 1 week ago, 21 May 2015, 05:51pm -
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Mini Mashup: Changes Afoot in VIX Trading [Quantocracy]
There are some changes afoot in the VIX trading space with the launch of the VIX ETFs VXUP and VXDN. Even if you don’t trade those specific products, they might be having a knock-on effect on VIX futures, which would impact all other VIX ETF/ETNs like VXX and XIV. There is a subset of our
- 1 week ago, 21 May 2015, 02:14pm -
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The Risks of Owning an Individual Stock [Alpha Architect]
How risky is it to buy an individual stock? This is a question investors should ask themselves when deciding to buy a single stock. However, many investors tend to get caught up in the story about why company XYZ is going to double over the next year. As an educated investor, it makes sense to know
- 1 week ago, 21 May 2015, 02:07pm -
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The Perils of Day and Position Trading in Zero-Sum Markets. Part Three: Forex Day Trading [Price Action Lab]
This is the third part of a four part series on the perils of day and position trading in futures and forex markets. In this part, the results of simulations involving a large number of random trading systems using intraday EURUSD data confirm the empirical fact that only a very small percentage of
- 1 week ago, 21 May 2015, 12:10pm -
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Will Natural Gas Soar With the Wind in June? [Jay On The Markets]
See Jay’s recent post: One More Plunge for Crude Oil? OK, my last article (Will Natural Gas Break Wind in June?) did sound a little apocalyptic regarding the prospects for natural gas in June. But maybe that did not present the full picture. While that previous article did detail a bearish
- 1 week ago, 21 May 2015, 12:09pm -
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Put/Call ratios pretty low... $SPX $SPY [@NautilusCap]
Put/Call ratios pretty low... $SPX $SPY
- 1 week ago, 21 May 2015, 12:09pm -
0
SPX Iron Condor - High Loss Threshold - 52 DTE [DTR Trading]
This post looks at a standard (STD) one-lot iron condor on the S&P 500 Index (SPX), initiated at 52 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester. For background on the setup for the backtests, as well as the
- 1 week ago, 21 May 2015, 12:09pm -
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Intermarket Analysis: The Pathfinder | Trading Strategy (Filter) [Oxford Capital]
I. Trading Strategy Developer: Nelson F. Freeburg. Concept: The currency trading strategy based on the intermarket analysis. Source: Freeburg, N. F. (Dec. 1993). Formula Research, Quantitative Treatment of the Financial Markets. Memphis, TN: Formula Research, Inc. Research Goal: Performance
- 1 week ago, 20 May 2015, 10:06pm -
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An Unfolding Finite Difference Algorithm in Javascript [John Orford]
very model's assumptions get thrown out the window as soon as things get really rocky. Every model is short vol. Even those for which getting volatility right is crucial! Take the binomial tree approach to pricing options for example. See my previous post here. From 'Paul Wilmott
- 1 week ago, 20 May 2015, 10:06pm -