Quant Mashup Dual Momentum Between Gold and Bitcoin (Two Stores of Value) [Aligrithm]An 8-week dual-momentum switch between GLD and IBIT returns 79.91% a year at a Sharpe of 1.64. Vojtko and Dujava report that number on a Quantpedia note covering 31 December 2018 through April 2026, weekly rebalance at Wednesday's close, cash when both lookbacks print negative. Hold the other(...) VIX and Trend Following Revisited: Nearly a Decade of Out-of-Sample Evidence [Alpha Architect]In September 2017, Alpha Architect published VIX and Trend-Following, the Killer Combo?, an empirical examination of whether volatility information could improve a traditional trend-following allocation model. The central idea was intuitive: market volatility may contain useful information about how(...) Factor Timing Mostly Fails — the Honest Version [Aligrithm]Factor timing is the seductive idea that you can do better than holding a basket of factors: lean into value when value looks cheap, load momentum when momentum is running, cut a factor when its volatility spikes. Every one of those moves has a tidy formula and a plausible story. And when you run(...) Sharpe Ratio Distribution: When Normal's A No-Go, Why Not SHASHo? [Krzysztof Ozimek]I recently came across López de Prado et al.'s (2026) treatment of the Sharpe ratio estimator: — Normal, with the true as its mean, and a variance (see the Normal section of the image below) conditioned on sample size, the return series' autocorrelation, its skewness, its kurtosis, and(...) Market Regimes and Changing Market Dynamics [Relative Value Arbitrage]Markets have been behaving unusually lately. In May, equity indices rose while volatility and skew also increased, a relatively rare occurrence historically. Since last week, the same phenomenon has emerged again, with the spot/volatility correlation turning positive. Is this still a rare(...) How to Spot a Fake ML Trading Paper [Aligrithm]Three papers crossed my desk this month. One detects market manipulation with graph neural networks and reports 98.7% accuracy at 8.3 milliseconds per decision. A second, same author cluster, detects anomalies in high-frequency trading and reports a 15% accuracy improvement with an F1 of 0.915. A(...) I Scaled Out to Raise My Win Rate. It Didn't Move — and It Cost Me $115,000 [Jan Heger]You lock in gains, you stop giving winners back, and, the part everyone repeats, your win rate goes up. I tested it on 3,966 of my own trades. Two of those three claims are false, and the third one cost me a fortune. The setup I run an automated futures system with a fixed exit: each strategy takes(...) Autopsy No.005: The congressional-trading ETF that beats the market [Morgue Labs]Where this came from. A reader replied to Autopsy №001 with a Morningstar page showing NANC ahead of the index and a fair question: what am I missing? They were not missing anything. The fund really has outperformed. This is the answer to what that outperformance is made of. Unlike our other case(...) The Rise of CTA ETFs [Concretum Group]Over the past few years, the liquid alternatives space has moved decisively into a new ETF era. What was once a narrow category now stretches from CTA to hedge-fund replication strategies, sometimes pairing those return streams directly with core stocks and bonds exposures. And thanks to their(...) Autopsy No.003: Buying options for the big win [Morgue Labs]The pitch One screenshot: $6k into weekly calls, $1.2M out. The logic sounds like physics — options have capped downside and uncapped upside, so keep buying cheap lottery tickets and one asymmetric win pays for everything. The post-2021 refinement adds a mechanism: find the gamma squeeze, ride the(...) Does AI Still Read the News Better Than the Market? [Tommi Johnsen]A well-known finance paper showed that an AI model could read a news headline about a company and say, better than chance, which way the stock would move. The same paper predicted the effect would fade as more traders started using the same tools. Thanks for reading! Subscribe for free to receive(...) Stop Using Pairwise Granger: PCMCI for Financial Causality [Aligrithm]Run pairwise Granger tests over a basket of thirty instruments and you get a causal network that looks like a plate of spaghetti. AUD/USD drives copper, copper drives the Aussie back, oil leads the loonie, the loonie leads oil, and somewhere in the mess a small-cap ETF appears to Granger-cause the(...) Excessively Volatile? Or Inexplicably Precise? [Alex Chinco]The dividend discount model (DDM) says that a stock’s current price ought to reflect the discounted value of its expected future dividend stream (1) \begin{equation*}\mathrm{Price} = \sum_{t=1}^{\infty} \frac{\mathbb{E}[\mathrm{Div}_{t}]}{(1{+}r)^t}\end{equation*} \mathbb{E}[\mathrm{Div}_t] is the(...) 150 Years of Global Stock Returns - The Birthplace Lottery [Beyond Passive]Every investor who holds only their home market has made the same decision. Over the last century and a half that decision paid an Australian seven percent a year in real terms and a Portuguese investor less than one. Nobody chose which of those they were born into. The number everyone quotes(...) Bid-Ask Spread From OHLC: The GMM Estimator That Beats Roll/CS [Aligrithm]You backtest a strategy, subtract "a spread" for costs, and move on. Where did that number come from? If you typed in a guess, or pulled a single quoted spread from a vendor, you are almost certainly wrong, and wrong in the one direction that flatters your worst assets. The effective(...) Bond indices and systematic duration management [Macrosynergy]This article presents methods for adjusting the duration of major countries in global bond indices using point-in-time measures of local economic conditions. The macro factors include inflation, credit conditions, real estate price growth, yield-curve valuations, and economic surprises. Each has(...) Trading Strategy Comparison: Is B Really Better Than A? [Krzysztof Ozimek]How a single-value performance metric can distort the ranking of trading strategies — and how to avoid falling for it and gain deeper insight into strategy comparison. Diagram comparing probability distributions of trading strategies A and B, showing why a single higher performance value (V_B)(...) Skewness as a Hidden Driver of Anomaly Returns [Alpha Architect]Behavioral finance research has established that investors dislike negative skewness because it exposes them to rare but severe losses, while they embrace positive skewness because it offers the chance of occasional outsized gains — the lottery-like appeal that persists even when expected payoffs(...) Taming the Wildcard: David Varadi's "Inflation Compass" [Allocate Smartly]This is an independent test of a novel strategy from David Varadi: Inflation Compass. It builds on his earlier Growth and Inflation strategy by adding a direct market-based measure of expected inflation. We’re testing two versions of his new strategy: Original and Enhanced (more on this later).(...) Testing for Mean Reversion: ADF, Hurst Exponent and Half-Life [Quantt]A time series is mean-reverting if it tends to return to a stable long-run level after being displaced from it. In pure form, that means the process has a well-defined unconditional mean and a variance that does not grow without bound; shocks decay rather than accumulate. This is the opposite of a(...) The Mathematics of Machine Learning, for Traders [Aligrithm]You already ran the models. The old article "From One Tree to Forests to Boosting" walked you from a single decision tree to XGBoost, "How a Decision Tree Engineers a New Alpha" showed a tree carving conditional edges out of order-book features, and "Ridge Above 1h, XGBoost(...) The Ornstein-Uhlenbeck Process in Finance: Theory, Simulation and Calibration [Quantt]What Is the Ornstein-Uhlenbeck Process? The Ornstein–Uhlenbeck (OU) process is the simplest continuous-time model of a mean-reverting random process. It was introduced in 1930 by Leonard Ornstein and George Uhlenbeck as a physical model of the velocity of a Brownian particle experiencing friction(...) The Statistic That Passed Every Test I Had And Still Isn't an Edge [Jan Heger]It cleared the control test that kills almost everything I try and that I still won’t trade. That’s because there’s a gap between those two things and it is the most useful thing I’ve learned building this system, so let me show you what actually happened. The pattern For this particular(...) The Signal Ceiling: Why No Single-Bar OHLCV Edge Beats Costs in MNQ [Aligrithm]Open any retail futures forum and you will find the same fourteen setups traded as gospel: the opening range breakout, the gap fade, the gap continuation, the volume spike, the liquidity grab reversal, the Asia session expansion. Each comes with a chart, a win rate, and a story about why it works.(...) Quick 5 ETF Rotational Strategy Returns the Upside of Stocks with Half the Risk [Paper to Profit]The last few posts have been a lot to chew through. So here is a simple ETF rotational strategy that you can do to capture the upside of equities while eliminating half the risk. The inspiration for this strategy comes from the paper Looking for Synergy with Momentum in Main Asset Classes which you(...) Quantitativo weekly #4 [Quantitativo]“The only sustainable competitive advantage is to learn faster than your competition.” Arie de Geus Implementing research papers can sometimes work, though a perfect replication often fails. It’s never wasted effort, though: the ideas in the paper end up feeding new ideas and good(...) Supertrend, flipped to death: the most-taught indicator on the internet [The Refutation]If you learned to trade from YouTube, you probably learned the Supertrend. It topped our folklore hunt being the single most-taught beginner tool on the internet, complete with the green-line/red-line screenshots and the promise that the trend will tell you when to start riding the new trend. So we(...) Down June & July: 11 of 13 Septembers Closed Lower [Quantifiable Edges]Both June and July saw SPX close lower. Seasonality for those two months it is generally favorable. But since 1950, two of the weakest months are August (3rd worst) and September (worst). So in this weekend’s letter I decided to see how August and September fared when we already had June and July(...) Conformal Prediction in Quantitative Finance [Vertox Quant]In one of our previous articles, we built a neural-network-based volatility forecaster that beats baseline models in all volatility regimes: Volatility Forecasting using Neural Networks Vertox · Jun 22 Volatility Forecasting using Neural Networks Today, we are gonna look at something we’ve never(...) Making Option Pricing Models More Practical [Relative Value Arbitrage]The Black-Scholes-Merton model is one of the cornerstones of modern quantitative finance. Despite its elegance and widespread use, its simplifying assumptions limit its ability to capture many features of real financial markets. As a result, researchers continue to extend the model to make it more(...) The 58% Win Rate That Was My Own Code Lying To Me [Jan Heger]Below I have shared my story of an idea that passed four checks I’d set in advance and died on the fifth, and why the fifth one is now the first thing I run. The setup I like to day-trade MNQ, and I’d built a framework around specific price levels that I have created. The core claim was simple:(...) Fair Value as an Adaptive Low-Pass Filter: LAFO for Mean Reversion [Aligrithm]Every mean-reversion trade starts with a lie you tell yourself about where price "should" be. You call it fair value, you subtract it from the spot price, and you bet the gap closes. Most traders reach for a moving average and stop thinking. Xu, Firoozye, Koukorinis, Treleaven, and Zhu at(...) We tested the 50/100 MA ribbon 55 different ways over five years [The Refutation]Move like the wind, be still as the mountain, the old strategists taught. The moving-average ribbon promises to tell you which moment you're in. The catch: it's built from the past, so the wind it reads has already blown. Stack a fan of moving averages on a chart and assign colours to(...) Bitcoin's Overnight Returns Forecast the VIX [Aligrithm]Split one Bitcoin day into two pieces and only one of them predicts anything. The piece that runs while US stock exchanges are closed, from yesterday's 4pm close to today's 9:30am open, carries a signal for tomorrow's VIX. The piece that runs while those exchanges are open carries(...) I Invented 2021 Candle Types to Find the One Holy Grail [Paper to Profit]We spend our trading lives looking at charts, plugging in different indicators, not to realize that we are painting on top of the same old picture. Instead of trying a different color of paint, we need to change the canvas. And in doing just that, you may have won yourself a spot in the lead.(...) Path Signatures: Does the Shape of Price Paths Predict Returns? [Delphic Alpha]Every indicator you use on a rolling window, momentum, RSI, Bollinger bands, discards the order in which events occurred. Two 2-hour windows with identical total return and identical range expansion score identically, even if one saw price rally first and volatility respond, while the other saw(...) A Microstructural Account of the Demise of Short-Term Trend-Following [Quantpedia]Trend following was one of the most persistent anomalies in finance for nearly two centuries, yet its performance deteriorated sharply after the 2008 financial crisis. An analysis of approximately 100 liquid futures contracts from 1995 to 2025 shows that this decline is highly selective. The(...) A Database of Historical Macroeconomic Events [Concretum Group]Most quantitative backtests start with prices: a clean historical database, ideally free of survivorship bias and the usual data traps. We have written a lot about that already, and shared practical ways for independent researchers to build more reliable datasets. At some point, though, research(...) Does Your Backtest Survive the Adverse Same-Bar Fill? A 48.8 Million-Pair Stress Test [Rulyfi]Key Takeaways An OHLC bar can show that take-profit and stop-loss prices were both touched. It cannot show which came first. Run the same search under both TP-first and SL-first before promoting a candidate. We evaluated 48,825,000 identical configurations twice, forming 97,650,000 backtest runs.(...) Chicken and Egg: Use the SPX to Time the VIX, Not Vice Versa [Aligrithm]Twenty years of retail research points the arrow one way. You read the VIX, and the VIX tells you where the S&P 500 is going. Oversold VIX means complacency, sell stocks; spiked VIX means panic, buy the dip. Connors built a cottage industry on it, and every trading forum still runs some version(...) When Risk Is Not Rewarded [Concretum Group]Modern portfolio theory is built on a remarkably intuitive idea: investors should earn higher expected returns for bearing greater risk. This principle lies at the heart of the Capital Asset Pricing Model (CAPM), one of the most influential models in financial economics. According to the theory,(...) Podcast: Why I stopped trying to predict the market [Trading the Breaking]In this episode of House of Quants, listeners will discover: My personal perspective: The episode traces the journey from engineering, statistics, data science, and algorithmic trading toward quantitative research, explaining how each field contributed to a deeper understanding of uncertainty,(...) The Inflation Compass Model [CSS Analytics]“When inflation shifts from low to high, a traditional 60/40 equity-and-bond allocation breaks down because both fall together. You need real assets to act as the ballast.” — Ray Dalio Inflation is one of the most powerful forces in asset allocation—and one of the hardest to measure in real(...) Crafting a Trading Strategy [Handelsmeisterei]Alpha rarely arrives as one heroic discovery. It is more like an ant colony carrying a leaf many times its own size: dozens of small contributions, each unimpressive on its own, somehow producing an impressive result. Unfortunately, research also resembles an ant(...) The NAAIM-AAII Equities Allocation Spread: Smart Money Relative Sentiment Indicator [Portfolio Optimizer]In a previous blog post, I described the NAAIM Exposure Index, which represents the average exposure to U.S. equity markets as reported by members of the National Association of Active Investment Managers (NAAIM) in a weekly survey. In this second post of this series on sentiment indicators, I will(...) GAMLSS/ZAGA: Conditional IR* Distribution For Trading Strategies [Krzysztof Ozimek]I wrote my newest paper mainly to challenge the conventional way of judging an investment or trading strategy through a single observational point of its performance metric — an approach that discards precious information about a strategy's effectiveness and can lead to false conclusions.(...) Network Momentum [Quantitativo]“Networks are everywhere. All you need is an eye for them.” Albert-László Barabási. Albert-László Barabási is a Romanian-born Hungarian-American physicist, renowned for his pioneering discoveries in network science. In his seminal 1999 paper with Réka Albert, “Emergence of Scaling in(...) Momentum Is a Ranking Problem: Learning-to-Rank vs Regress-then-Rank [Aligrithm]Cross-sectional momentum has one job: at each rebalance, order a universe of assets from worst to best, buy the top, sell the bottom. Everyone agrees on that. Where strategies quietly disagree is on how they produce the order. Classic momentum sorts on the past twelve-month return. A neural net(...) Part (3/3) - Refiner Trade: A Second Signal and the Case for Trading Less [Beyond Passive]The first part described the idea and put a gross Sharpe of about one and a half on it. The second part set it in front of a broker’s fees and an integer number of shares, and watched most of the edge go to the cost of trading. This part adds a second signal, drawn from the same spread. It does(...) Portfolio optimization with macro factors and neural networks [Macrosynergy]This article shows a practical method for optimizing equity portfolios with point-in-time macroeconomic information and sequential statistical learning. The learning process relies on neural networks, as they learn portfolio weights directly from a full historical panel of macroeconomic divergence(...)