Quant Mashup - Mathematical Investor

Marcos Lopez de Prado named “2019 Quant of the Year” by Journal of Portfolio Management [Mathematical Investor]

Marcos Lopez de Prado, a member of Mathematicians Against Fraudulent Financial and Investment Advice (MAFFIA), has been named “2019 Quant of the Year” by Journal of Portfolio Management. Here are some excerpts from their press release: The Journal of Portfolio Management (JPM) has named Marcos

*- 1 month ago, 30 Jan 2019, 03:15am -*

Jack Bogle: The apostle of index investing [Mathematical Investor]

Jack Bogle, founder of Vanguard Funds and a life-long apostle of index investing, died on 16 January 2019. Vanguard CEO Tim Buckley summarized his career in these terms: “Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless

*- 2 months ago, 18 Jan 2019, 10:02pm -*

How bad is the problem of data misuse in finance research papers? [Mathematical Investor]

Spurious results are the norm Having done a healthy share of paper replications over the past decade, and having been consistently disappointed when the models or techniques broke down on data shortly after (or even before) the authors’ sample periods, I would say that data misuse is a gigantic

*- 2 months ago, 1 Jan 2019, 09:47pm -*

The Problem With Financial Oracles [Mathematical Investor]

In recent years, machine learning techniques and big-data facilities have become quite popular in the finance and investment world. In the wake of this success, numerous machine learning researchers have decided to found their own asset management companies, hoping to capitalize on this trend. This

*- 4 months ago, 5 Nov 2018, 09:10pm -*

Mutual fund performance and survivorship bias [Mathematical Investor]

As we have noted in previous Mathematical Investor blogs (see this blog for instance), surprisingly few mutual funds beat their respective benchmark (typically some market index). Even fewer consistently beat their benchmarks year after year. A new report from S&P Dow Jones sheds light on this

*- 7 months ago, 4 Aug 2018, 12:40pm -*

Are economics and finance "lost in math"? [Mathematical Investor]

In a provocative new book, Lost in Math: How Beauty Leads Physics Astray, quantum physicist Sabine Hossenfelder argues that the scientific world in general, and the field of physics in particular, has repeatedly clung to notions that have been rejected by experimental evidence, or has pursued

*- 8 months ago, 7 Jul 2018, 07:55am -*

New video explains the danger of selection bias in finance [Mathematical Investor]

A new video has been produced by the Mathematicians Against Fraudulent Financial and Investment Advice (MAFFIA) group. It explains, in simple terms, how many of the financial strategies and funds available today are based on a statistically dubious foundation, typically rooted in selection bias

*- 9 months ago, 13 Jun 2018, 10:55am -*

Economics, finance and pseudoscience [Mathematical Investor]

Bloomberg columnist Mohamed El-Erian recently lamented that the discipline of economics “is divorced from real-world relevance and has lost credibility.” Among the problems he mentions currently afflicting the field are the following: The proliferation of simplifying assumptions that lead to an

*- 10 months ago, 29 Apr 2018, 09:24pm -*

The most important plot in finance [Mathematical Investor]

In this post we look at the one plot that proves that technical analysis (TA) is useless. TECHNICAL ANALYSIS AND HOROSCOPES As volatility has made a come back in recent months, investors have sought advice to asset managers. In many instances, such advice consists in technical indicators. Charles

*- 11 months ago, 2 Apr 2018, 11:48am -*

Review: Advances in Financial Machine Learning [Mathematical Investor]

Two of the most talked-about topics in modern finance are machine learning and quantitative finance. Both of these are addressed in a new book, written by noted financial scholar Marcos Lopez de Prado, entitled Advances in Financial Machine Learning. In this book, Lopez de Prado strikes a well-aimed

*- 1 year ago, 21 Mar 2018, 11:43pm -*

Does indexing threaten the market? [Mathematical Investor]

Index investing has grown significantly over the past 30 years. Back in 1990, few were even aware of the option for indexing, and options were limited mostly to a handful of conventional mutual funds tracking the U.S. S&P 500 index. In 1993, Boston’s State Street Global Advisors launched the

*- 1 year ago, 17 Mar 2018, 10:05pm -*

Can mutual fund investors beat the market? [Mathematical Investor]

Many individual investors employ mutual funds as an alternative to direct ownership of stocks or bonds. Indeed, mutual funds have some advantages: Diversity: Even a single fund can encapsulate a large sector of the market. Peace of mind: One is less likely to stress out about sudden bad news

*- 1 year ago, 23 Jan 2018, 05:16am -*

Can the January effect be exploited in the market? [Mathematical Investor]

The “January effect,” in common with the “Halloween indicator” and “sell in May and go away”, is a catchy, get-rich-quick investment idea adored by financial commentators because it is so easy to explain to unsophisticated readers. It rests on the claim that the U.S. stock market

*- 1 year ago, 4 Jan 2018, 09:17am -*

How is big data impacting the finance world? [Mathematical Investor]

“Big data” is already a frequently-heard buzzword, both in the business analytics arena, but also in the field of high-performance scientific computing. Basically, “big data” encompasses the collection, processing, indexing and utilization of large-scale datasets. Some concrete examples

*- 1 year ago, 12 Dec 2017, 09:15am -*

How universities are failing finance students [Mathematical Investor]

One of us (Marcos Lopez de Prado) has been interviewed on the topic of educational training in the finance field by Institutional Investor. A brief synopsis of this interview is below. The full article is HERE. How Universities Are Failing Finance Students With investment shops fighting over

*- 1 year ago, 26 Oct 2017, 12:07pm -*

Pseudo-quants [Mathematical Investor]

As the old joke says, “math is what mathematicians do.” Somehow this simple tautology is lost in the dishonest world of finance Quantitative investing: A crisis waiting to happen In a recent WSJ article, Jason Zweig brilliantly summarizes the unbearable hype and hubris exhibited by some

*- 1 year ago, 7 May 2017, 11:03pm -*

Backtest overfitting in smart beta investments [Mathematical Investor]

In the past few years “smart beta” (also known as “alternative beta” or “strategic beta”) investments have grown rapidly in popularity. As of the current date (January 2017), assets in these investment categories have grown to over USD$500 billion, and are expected to reach USD$1

*- 2 years ago, 31 Jan 2017, 09:42pm -*

Mathematics and economics: A reality check [Mathematical Investor]

One of us (Marcos Lopez de Prado) has published the article Mathematics and economics: A reality check in the Journal of Portfolio Management. The article is open-access — there is no fee for viewing or downloading. Lopez de Prado argues that while economics is arguably one the most mathematical

*- 2 years ago, 27 Oct 2016, 10:49am -*

How difficult is it to design a stock fund based on backtests? [Mathematical Investor]

Over USD$2 trillion is held in exchange-traded equity funds, just in the U.S., with hundreds of new funds added each year. Strategies vary from simple index-tracking funds to funds that follow sophisticated strategies (e.g., “smart beta”) designed to yield impressive results, based on backtests.

*- 2 years ago, 8 Sep 2016, 02:31am -*

The folly of panic selling [Mathematical Investor]

Mark Hulbert has compiled an interesting list of recent market panics: August 2015: Concerns about the Chinese economy and stock market led to panic selling, with the Shanghai index plunging 8.5% in one day. Soon after in the U.S., on August 24, 2015, the DJIA plunged over 1,000 points in just a few

*- 2 years ago, 24 Aug 2016, 12:44am -*

Where are the billionaire financial academics? [Mathematical Investor]

According to the just-published 2016 Rich List of the World's Top-Earning Hedge Fund Managers by Institutional Investor's Alpha magazine, eight of the top ten earners fall into the "quant" category, and half of the 25 richest of the year are quants. The firms listed include the

*- 2 years ago, 18 Jul 2016, 12:42pm -*

How well does the "January barometer" work? [Mathematical Investor]

The January barometer is the claim, often mentioned in financial circles, that the performance of the stock market in January is a reliable portend of its performance for the full year — as January goes, so goes the year. The term was first coined by Yale Hirsch in 1972. Many market analysts take

*- 3 years ago, 21 Jan 2016, 12:52pm -*

High noon for 2015 market prophets [Mathematical Investor]

When a prophet speaketh, … if the thing follow not, nor come to pass, … the prophet hath spoken it presumptuously: thou shalt not be afraid of him.” [Deuteronomy 18:22]. In a December 2014 Math Investor blog, we assessed how 2014 market prophets had fared (answer: not very well). Thus with the

*- 3 years ago, 24 Dec 2015, 08:43am -*

Is research in finance and economics reproducible? [Mathematical Investor]

Reproducibility in scientific research In the past year or two, the reproducibility of research results in finance and economics has come under serious question. If it is any comfort, similar difficulties have emerged in numerous other scientific fields. In 2011, a team of Bayer researchers

*- 3 years ago, 9 Oct 2015, 10:22pm -*

Three of the all-time top ten SSRN Econometrics: Math papers are from the MAFFIA [Mathematical Investor]

The Social Science Research Network’s Econometrics: Mathematical Methods and Programming eJournal distributes working and accepted paper abstracts in the area of mathematical methods applied to econometrics. The journal maintains a list of the All Time Top Ten Papers of the journal, based on total

*- 3 years ago, 5 Jun 2015, 03:25am -*

Lessons from the “Flash Crash” regulatory fiasco [Mathematical Investor]

On April 21, 2015, the U.S. Department of Justice announced that it would press criminal charges against Mr. Navinder Singh Sarao, a 36-year-old small-time British day-trader. He is being blamed for nothing less than causing the “Flash Crash” of May 6, 2010, the second largest point swing

*- 3 years ago, 27 Apr 2015, 03:15am -*