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4
Best Links of the Week [Quantocracy]
The best links of the week ending Saturday, 07/04 as voted by our readers: Fitness Landscape Analysis for Computational Finance [Turing Finance] VIX Trading Strategies in June [Volatility Made Simple] Switching From Stocks to Bonds Based on a 200-day Moving Average Crossover [Price Action Lab]
- 5 hours ago, 5 Jul 2015, 09:24am -
3
System Trading? Trading Experts? Let’s Be Honest [Price Action Lab]
All trading methods arise from an esoteric complex process that is based on experience with the markets and quantitative skills. Experience is personal and difficult to convey to others. Quantitative knowledge can be achieved only through advanced education, an elaborate process. Furthermore, only
- 1 day ago, 3 Jul 2015, 08:31pm -
1
State of Trend Following in June [Au.Tra.Sy]
Another down month for the State of Trend Following index. After a fairly good start to the year – until mid-March where the index registered its high for the year – the trend has been fairly clearly down. Possibly a drawdown phase following the very strong performance from 2014 and beginning
- 1 day ago, 3 Jul 2015, 08:31pm -
0
[Academic Paper] Defining and Dating Bull and Bear Markets: Two Centuries of Evidence [@Quantivity]
Defining and Dating Bull and Bear Markets: Two Centuries of Evidence
- 1 day ago, 3 Jul 2015, 07:29pm -
1
[Academic Paper] Factor Investing Revisited [@Quantivity]
Factor Investing Revisited
- 1 day ago, 3 Jul 2015, 07:27pm -
1
Wisdom State of Trend Following - June 2015 [Wisdom Trading]
June 2015: Trend Following DOWN -4.16% — YTD: +0.89% After a good start to the year, with the first three months being up and the index peaking in mid-March, a downtrend has now taken place. This has built a drawdown roughly equal to a third of the Max Drawdown figure (12% vs 34%), which is not
- 2 days ago, 3 Jul 2015, 09:03am -
2
Insuring tomorrow’s decline, today [MKTSTK]
As of pixel time the VIX is up over 7% and the S&P 500 is basically unchanged; we feel this situation arises when traders desire protection today for the possibility of danger tomorrow. In other words, the price of risk is rising and markets are stabilizing. Intuitively (i.e. the feeling our rat
- 2 days ago, 2 Jul 2015, 07:10pm -
2
The First Academic Paper with a Shotgun Picture in it [Alpha Architect]
Here is one of the figures in a Journal of Finance paper published in 2013 by N. Garleanu and L Pedersen. The figure depicts various portfolio optimizations under different assumptions and then has a visualization equivalent with hockey players, skeet shooters, and missile systems. I’m not sure
- 2 days ago, 2 Jul 2015, 07:10pm -
3
Time series analysis and data gaps [EP Chan]
Most time series techniques such as the ADF test for stationarity, Johansen test for cointegration, or ARIMA model for returns prediction, assume that our data points are collected at regular intervals. In traders' parlance, it assumes bar data with fixed bar length. It is easy to see that this
- 3 days ago, 2 Jul 2015, 09:13am -
2
For The VIX, It’s All About The Recovery [Dana Lyons]
We mentioned in a post yesterday on 90% Down Days that one of the challenges for risk managers is to correctly distinguish a minor market “dip” from something that is developing into a more serious decline. One potential aid in addressing that challenge comes from the behavior of the S&P 500
- 3 days ago, 2 Jul 2015, 09:13am -
4
Long/Short Hedge Fund Factors: Low-Cost Downside Protection? [Alpha Architect]
The holy grail of financial markets is finding strategies that have misaligned risk and reward characteristics. In the traditional view, investors try to do the following: Identify strategies that have high returns, then… find ways to get the exposure with the lowest risk possible. However, there
- 3 days ago, 1 Jul 2015, 07:34pm -
1
Serial Correlation in Time Series Analysis [Quant Start]
In last week's article we looked at Time Series Analysis as a means of helping us create trading strategies. In this article we are going to look at one of the most important aspects of time series, namely serial correlation (also known as autocorrelation). Before we dive into the definition of
- 3 days ago, 1 Jul 2015, 07:34pm -
2
When Should You Exit Your Iron Condor? [DTR Trading]
During the last several posts, we expanded our Iron Condor exit analysis to include results where trades were held to higher loss thresholds. You can review both the first and second sets of articles at the following pages: Dynamic Exit Iron Condor Articles High Loss Threshold Iron Condor Articles
- 3 days ago, 1 Jul 2015, 07:33pm -
7
VIX Trading Strategies in June [Volatility Made Simple]
We've tested 23 simple strategies for trading VIX ETPs on this blog (separate and unrelated to our own strategy). And while I can't speak for all traders, based on all of my readings both academic and in the blogosphere, the strategies we've tested are broadly representative of how
- 4 days ago, 1 Jul 2015, 10:21am -
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Switching From Stocks to Bonds Based on a 200-day Moving Average Crossover [Price Action Lab]
I offer analysis in this blog motivated by a reply to a tweet I made yesterday regarding the essence of the 200-day moving average. I show that the choice of a 200-day moving average for the purpose of stock-bond allocation is sub-optimal. Furthermore, any reduction in drawdown levels can be
- 4 days ago, 1 Jul 2015, 10:21am -
3
Does the VIX Know More than the S&P 500? [Factor Wave]
It is commonly believed that option markets are “smarter” than equity markets. There could be several reasons for this. Trading options is mathematically complex. It involves estimating volatility, solving differential equations and devising hedging algorithms. It is true that most professional
- 4 days ago, 1 Jul 2015, 10:21am -
3
1st of Month by Month (Updated) [Quantifiable Edges]
A few times over the years I have shared this study. It breaks down the bullish “1st trading day of the month” tendency by month. I thought it would be interesting to take another look at it today. Below is an updated version of the study orginally shown here on July 1, 2009. July has continued
- 4 days ago, 1 Jul 2015, 09:39am -
4
Is The Stock Selloff Over -- Or Just Beginning? [Dana Lyons]
“Is this to end or just begin?” - All My Love by Led Zeppelin As risk managers, one of the challenges is to determine whether a market pullback is just a minor dip or a precursor to a larger decline. The correct interpretation determines the appropriateness of “buying the dip” versus selling
- 4 days ago, 1 Jul 2015, 04:43am -
0
Ivy Portfolio July Update [Scott's Investments]
The Ivy Portfolio spreadsheet track the 10 month moving average signals for two portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that have trading signals based on long-term
- 4 days ago, 1 Jul 2015, 04:42am -
0
More on the Momentum++ Strategy [John Orford]
Glenn@AlignCapital mentioned how the seminal Momentum paper by Jegadeesh and Titman (1993) recommends forming and buying a momentum portfolio a week a part. In the cracks of their beseeching everyone to 'skip a week' and avoid wicked 'short term reversals' I accidentally grew the
- 4 days ago, 1 Jul 2015, 04:40am -
1
Forex Trading Diary #7 - New Backtest Interface [Quant Start]
Although I've spent the majority of this month researching time series analysis for the upcoming article series, I've also been working on QSForex attempting to improve the API somewhat. In particular I've made the interface for beginning a new backtest a lot simpler by encapsulating
- 4 days ago, 30 Jun 2015, 06:17pm -
0
The Philosophy of Value Investing - Reject 'New Paradigm" Thinking [Alpha Architect]
Every few years, people start to question whether value investing is dead. A recent Google search along these lines generated 3.1 million results: 2015-06-15 10_49_59-the death of value investing - Google Search Likewise, people sometimes question whether the size effect is permanently going away.
- 4 days ago, 30 Jun 2015, 06:17pm -
2
"Systematic Trading" - the book - now available to pre-order [Investment Idiocy]
Isn't it pretty? The website, and pre-order page, for my magnum opus are now ready: www.systematictrading.org http://www.harriman-house.com/book/view/4598/trading/robert-carver/systematic-trading/ Like it says on the back "This is not just another book with yet another trading system. This
- 5 days ago, 30 Jun 2015, 11:23am -
0
[Academic Paper] Lifetime of a Financial Bubble [@Quantivity]
Lifetime of a Financial Bubble
- 5 days ago, 29 Jun 2015, 11:42pm -
0
[Academic Paper] Do Index Futures and ETFs Affect Stock Return Correlations? [@Quantivity]
Do Index Futures and ETFs Affect Stock Return Correlations?
- 5 days ago, 29 Jun 2015, 11:39pm -
11
Fitness Landscape Analysis for Computational Finance [Turing Finance]
Some of the most interesting new research coming out of the Computational Intelligence Research Group (CIRG), which is applicable to numerous computational finance and machine learning optimization problems, is the development of fitness landscape analysis techniques. Fitness landscape analysis aims
- 5 days ago, 29 Jun 2015, 07:08pm -
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Building a simple moving average (SMA) crossover strategy in Microsoft Excel [Quants Portal]
In my previous article I introduced the two main methods of backtesting, vectorised and event driven. In this article I will cover an example of a vectorised backtest in Excel. One of the benefits of using Excel is that you are able to see a visual representation of the data as the model progresses.
- 5 days ago, 29 Jun 2015, 07:07pm -
0
Getting started with Backtesting [Quants Portal]
Foreword by Joshua Ulrich: Jacques reached out to me to discuss the Backtesting in Excel and R series on my blog, FOSS Trading. Inspired by that series, Jacques wanted to create a more detailed explanation of how to backtest a strategy in Excel and R, and then to extend the examples to an
- 5 days ago, 29 Jun 2015, 07:07pm -
2
Weekend Effect [Factor Wave]
This is a phenomenon in the equity markets where the market rises over the weekend. There is still some debate over the existence and persistence of this effect but, as long as we carefully define exactly what we mean it is easy to test this idea. We are going to examine the S&P 500 since 1990
- 5 days ago, 29 Jun 2015, 07:06pm -
4
When Random Traders Profit, It is Hard to Prove Skill [Price Action Lab]
It is shown that random, long-only position trading in SPY based on a biased coin has resulted in 100% winners. The simulation results also confirm that proving trading skill requires returns in excess of buy and hold return. The simulation environment A biased coin with p{heads} = 0.9 Toss a coin
- 6 days ago, 29 Jun 2015, 12:56pm -
1
Backtesting With Synthetic and Resampled Market Histories [Capital Spectator]
We’re all backtesters in some degree, but not all backtested strategies are created equal. One of the more common (and dangerous) mistakes is 1) backtesting a strategy based on the historical record; 2) documenting an encouraging performance record; and 3) assuming that you’re done. Rigorous
- 6 days ago, 29 Jun 2015, 12:45pm -
0
New related paper to #118 - Time Series Momentum Effect [Quantpedia]
#118 - Time Series Momentum Effect Authors: Georgopoulou, Wang Title: The Trend is Your Friend: Time-Series Momentum Strategies Across Equity and Commodity Markets Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2618243 Abstract: Using a dataset of 67 equity and commodity indices from 1969
- 6 days ago, 29 Jun 2015, 12:44pm -
0
RUT Iron Condor - High Loss Threshold Results Summary [DTR Trading]
Over the last six blog posts we looked at eight different exit approaches for a standard RUT iron condor with 20 point wings. These exits included: STD - NA%:NA% - exit at 8 DTE. STD - NA%:50% - exit if the trade has a profit of 50% of its initial credit OR 8 DTE. STD - 100%:50% - exit if the trade
- 6 days ago, 29 Jun 2015, 12:43pm -
8
Best Links of the Week [Quantocracy]
The best five links of the week ending Saturday, 06/27, as voted by our readers: Interview with Ernest Chan [Better System Trader] Think MPT Doesn't Work? Clearing Up Some Misconceptions [CSS Analytics] Creating an Open Source Hedge Fund Strategy [Quants Portal] Losing Streak Indicator [System
- 6 days ago, 29 Jun 2015, 04:49am -
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Interview with Andreas Clenow [Better System Trader]
Andreas Clenow is a hedge fund manager who specialises in developing and trading quantitative strategies across all asset classes. He is currently a principal at ACIES Asset Management, which he joined after having successfully established his own hedge fund. Prior to his role as a hedge fund trader
- 6 days ago, 29 Jun 2015, 04:49am -
1
How regression statistics mislead experts [Eran Raviv]
This post concerns a paper I came across checking the nominations for best paper published in International Journal of Forecasting (IJF) for 2012-2013. The paper bears the annoyingly irresistible title: “The illusion of predictability: How regression statistics mislead experts”, and was written
- 6 days ago, 29 Jun 2015, 04:48am -
0
Improved Fractal Strategy [John Orford]
little scepticism is healthy, however, many of you know the feeling of being plagued non-stop by this awkward feeling. My level of scepticism is always bobbing around unhealthy levels. So it's nice when a guy like Ilya questions numbers and kicks the tyres a little. An opportunity to treble
- 6 days ago, 29 Jun 2015, 04:47am -
3
Lazy Backtesting Update [John Orford]
The S&P Dow Jones data source is now available to use in the Lazy Backtesting IDE. All manner of interesting investable strategies and asset classes, including volatility and retirement date targeting; Vix contango & backwardation and other quant-style strategies; which you can combine,
- 1 week ago, 28 Jun 2015, 03:53am -
2
Bad Breadth Milestone A Warning For Stocks? [Dana Lyons]
We’ve been discussing the weakening market breadth recently, especially as it pertains to New Highs vs. New Lows. Again, our contention is that the more stocks participating in a rally, the healthier the rally is. The most recent example of this weak breadth was Wednesday’s post on the fact that
- 1 week ago, 28 Jun 2015, 03:52am -
2
[Academic Paper] Structured Products: Performance, Costs and Investments [@Quantivity]
Structured Products: Performance, Costs and Investments
- 1 week ago, 27 Jun 2015, 12:40am -
3
The Decision Moose Asset Allocation Framework [CXO Advisory]
A reader suggested a review of the Decision Moose asset allocation framework of William Dirlam. “Decision Moose is an automated framework for making intermediate-term investment decisions.” Decision Moose focuses on asset class momentum, as augmented by monetary policy, exchange rate and
- 1 week ago, 26 Jun 2015, 06:00am -
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The Market For ‘Lemons’: A Lesson For Dividend Investors [Research Affiliates]
Central banks the world over are buying high-quality bonds, thereby removing them from the market and forcing savers to find alternative strategies to meet their income needs. In this environment of financial repression and near-zero interest rates, dividend-yield (or equity income) investing has
- 1 week ago, 26 Jun 2015, 04:33am -
3
Estimating Crash-Risk Potential For The US Stock Market [Capital Spectator]
History shows rather clearly that the stock market is prone to extreme events, aka crashes. The challenge is deciding when the risk for a repeat performance is unusually high. The literature offers endless possibilities, which is a reminder that the market can crumble for any number of reasons. The
- 1 week ago, 26 Jun 2015, 04:31am -
2
Risk Aversion, Information Choice, and Price Impact [Alex Chinco]
Kyle (1985) introduces an information-based asset-pricing model where informed traders keep trading until the marginal benefit of holding one additional share of the asset is exactly offset by the marginal cost of this last trade’s price impact. This model has really nice intuition, but it also
- 1 week ago, 26 Jun 2015, 04:31am -
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Think MPT Doesn’t Work? Clearing Up Some Misconceptions [CSS Analytics]
I have spent many years toiling with creating different asset allocation methodologies including the application of traditional and non-traditional portfolio optimization. Given the recent flare of articles on this topic in the blogosphere, I felt it was worthwhile to share my two cents. Applying
- 1 week ago, 25 Jun 2015, 04:29am -
4
Backtesting – A Cautionary Example [Scott's Investments]
My previous article detailed backtest results for the ETFReplay.com portfolio. Aggregate, risk-adjusted results since 2004 were impressive when compared to a 60/40 Vanguard mutual fund. However, results over the past 2-3 years lagged the benchmark. The test below was conducted using Portfolio123
- 1 week ago, 25 Jun 2015, 12:46am -
1
How to Get a List of all NASDAQ Securities as a CSV file using Python? [Quant at Risk]
This post will be short but very informative. You can learn a few good Unix/Linux tricks on the way. The goal is well defined in the title. So, what’s the quickest solution? We will make use of Python in the Unix-based environment. As you will see, for any text file, writing a single line of Unix
- 1 week ago, 25 Jun 2015, 12:45am -
2
Lazy PCA Site Update [John Orford]
There's been a bunch of feature suggestions since the last update to the Lazy PCA site. All the code is on Github, if you have a little Javascript experience, I will gladly walk you through it. Please keep shooting feature ideas over too though. You know when you're done with an app when
- 1 week ago, 25 Jun 2015, 12:45am -
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Mutual Fund Sector Rotation – Ideas from readers [Alvarez Quant Trading]
he post ETF Sector Rotation generated good ideas on what to try differently. This post will research two ideas using Fidelity sector mutual funds. The previous post focused on two ideas on the Select Sector SPDR ETFs. Mutual Fund Universe These tests will use the Fidelity Sector Mutual Funds. The
- 1 week ago, 24 Jun 2015, 12:51pm -
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How to Make Money in Markets: Understanding Expectation Errors [Alpha Architect]
A new working paper from Gennaili, Ma, and the one-the-only Andrei Shleifer. Expectations and Investment Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs’ expectations
- 1 week ago, 24 Jun 2015, 12:47pm -