Quant Mashup - Quant Dare
Dual Momentum Analysis [Quant Dare]
Why dual momentum? Because strategies based on highest relative momentum show great results in the long run, but can experience deep falls and have little participation in the posterior rebounds after large market falls. To sidestep these drawbacks, here it is laid out a strategy based on Gary
- 7 years ago, 23 Feb 2017, 09:42pm -
Random forest: many is better than one [Quant Dare]
Random forest is one of the most well-known ensemble methods and it came up as a substantial improvement of simple decision trees. In this post, we are going to explain how to build a random forest from simple decision trees and to test how they actually improve the original algorithm. Maybe you
- 7 years ago, 15 Feb 2017, 11:23am -
Non-parametric Estimation [Quant Dare]
How can we predict future returns of a series? Many series contain enough information in their own past data to predict the next value, but how much information is useable and which data points are the best for the prediction? Is it enough to use only the most recent data points? How much
- 7 years ago, 1 Feb 2017, 11:19am -
Applying Genetic Algorithms to define a Trading System [Quant Dare]
When talking about quantitative trading, there are a large number of indicators and operators we can use as a buy/sell rule. But apart from deciding what indicator we will follow, the most important part would be setting the correct parameters. So, one method we can use to find adequate parameters
- 7 years ago, 22 Dec 2016, 05:04pm -
Levy flights. Foraging in a finance blog [Quant Dare]
Does this graph look like a kid’s drawing? Maybe a piece of art from the monkey Jeff? No, of course Jeff draws better than this. Actually, it is a representation of what is known as a Lévy flight, a mathematical concept that shows up in nature, marketing, cryptography, astronomy, biology, physics
- 7 years ago, 16 Nov 2016, 10:43am -
Principal Component Analysis [Quant Dare]
Principal Component Analysis (PCA) is a technique used to reduce the dimensionality of a data set, finding the causes of variability and sorting them by importance. >How? If you have a set of observations (features, measurements, etc.) that can be projected on a plane (X, Y) such as: DataSet
- 7 years ago, 5 Nov 2016, 10:40am -
Learning with kernels: an introductory approach [Quant Dare]
Time series pervade financial markets and, although some embrace the so-called efficient market hypothesis, stating that current market prices reflect all available information about a security into its price, I am more inclined to think they provide us with a lot of information that we rarely know
- 7 years ago, 28 Sep 2016, 12:28pm -
Clustering: "Two's company, three's a crowd" [Quant Dare]
It’s hard enough deciding which Machine Learning technique to use, but after selecting an appropriate clustering algorithm the next challenges begin: how good is the separation and into how many groups should you divide the data? Maybe three is not always a crowd… First, let’s set the scene We
- 7 years ago, 29 Jul 2016, 01:17pm -
Visualizing Fixed Income ETFs with T-SNE [Quant Dare]
In recent articles we were talking about PCA and ISOMAP, as techniques for dimensionality reduction. On this occasion, we put the focus on T-SNE, in relation with visualization and understanding of multidimensional datasets in a low dimension space, where the human eye can find patterns easily.
- 7 years ago, 7 Jul 2016, 01:05pm -
Hierarchical clustering, using it to invest [Quant Dare]
Machine Learning world is quite big. In this blog you can find different posts in which the authors explain different machine learning techniques. One of them is clustering and here is another method: Hierarchical Clustering, in particular the Ward’s method. You can find some examples in
- 7 years ago, 23 Jun 2016, 01:56am -
Lasso applied in Portfolio Management [Quant Dare]
There are a wide variety of Machine Learning techniques that help us to solve Big Data problems. In this post we talk about how to apply Lasso Regression in Portfolio Management. You may have heard of this technique in the past, for that reason I’ll try to explain it in a brief introduction. Lasso
- 7 years ago, 15 Jun 2016, 01:35pm -
Markov Switching Regimes say… bear or bullish? [Quant Dare]
We continue with our last OBSSESION… trying to capture an index trend but at the moment, not playing with future information. Markov Switching RegimesWe are going to introduce the Markov Switching Regimes (MSR) model which, as its name indicates, tries to capture when a regimen has changed to
- 7 years ago, 9 Jun 2016, 09:19am -
Exploring Extreme Asset Returns [Quant Dare]
Tail or extreme assets returns have been extensively studied. In his amazing paper: “Empirical properties of assets returns: stylized facts and statistical issues”, Rama Cont provides a framework on statistical analysis of price variations in various types of financial markets. He presents
- 7 years ago, 27 May 2016, 07:49am -
“K-Means never fails”, they said… [Quant Dare]
It is known that data mining algorithms are not perfect and they can fail under certain conditions. K-Means is an example of that triviality but there is a good alternative, K-Medoids. In a previous post, “Machine Learning: A Brief Breakdown” we already mentioned that K-Means is the cluster
- 8 years ago, 28 Apr 2016, 11:07am -
What is the difference between Bagging and Boosting? [Quant Dare]
Bagging and Boosting are both ensemble methods in Machine Learning, but what is the key behind them? Bagging and Boosting are similar as they are both ensemble techniques, where a set of weak learners are combined to create a strong learner that obtains better performance than a single one. So,
- 8 years ago, 20 Apr 2016, 11:03am -
Outliers: Looking For A Needle In A Haystack [Quant Dare]
Outliers are annoying. The analysis would be easier if they did not exit. Then, why not to remove them? As libesa told us in her last post titled “Machine Learning: A Brief Breakdown”, world is going crazy with Machine Learning and now we use it in all domains. In this post, we will see another
- 8 years ago, 6 Apr 2016, 12:24pm -
Autoregressive model in S&P 500 and Euro Stoxx 50 [Quant Dare]
In this post we are talking about autoregressive models and their application to a financial world. This model follows the idea that the next value of the serie is related with the p previous values. Definition of p-order autoregressive model An autoregressive model or AR is a type of modelling that
- 8 years ago, 31 Mar 2016, 03:12pm -
“Let’s make a deal”: from TV shows to identifying trends [Quant Dare]
How about trying to find any use of the famous Monty Hall problem in a stock index context? Let your imagination run… First of all, some of you may be confused because neither “Monty Hall problem” nor “Let’s make a deal” are familiar to you so I will refresh you what these names are
- 8 years ago, 17 Mar 2016, 04:08pm -
Machine Learning: A Brief Breakdown [Quant Dare]
Is everyone around you talking about Machine Learning? Have you heard about some algorithms and techniques but missing the bigger picture? This could be a good place to start… A new generation of intellect Machine Learning is a hot topic in the science world right now. By combining the powers and
- 8 years ago, 3 Mar 2016, 08:11am -
Approach to Dividend Adjustment Factors calculation [Quant Dare]
One question often asked in forums and blogs is how to adjust stock prices in order to take into account dividend payments. There are several reasons why we may be interested in adjusting stock prices: Analyzing total returns taking into account dividend reinvestments for reporting (performance,
- 8 years ago, 24 Feb 2016, 08:58am -
Are Low-Volatility Stocks Expensive? [Quant Dare]
The world of finance is no stranger to fashion and Low volatility equity investing has recently attracted serious interest from the investment community. Its popularity has led to doubts regarding the valuation level for this overcrowded arena. Just look at the current market caps of the most
- 8 years ago, 18 Feb 2016, 02:35pm -
Dream team: Combining classifiers [Quant Dare]
Can a set of weak systems turn into a single strong system? When you are in front of a complex classification problem, often the case with financial markets, different approaches may appear while searching for a solution. These systems can estimate the classification and sometimes none of them is
- 8 years ago, 3 Feb 2016, 12:50pm -
Could the Stochastic Oscillator be a good way to earn money? [Quant Dare]
If you knew the future price of assets when you are creating a portfolio, it would be the best way to be a millionaire. However, this is difficult if not impossible, so what if you knew what would be the movement of the price? It could be enough to earn money! To predict the trend of the price is
- 8 years ago, 13 Jan 2016, 10:32am -
Central Limit Theorem: Visual demonstration [Quant Dare]
Everybody knows about the Central Limit Theorem, but have you ever seen a visual demonstration? The central limit theorem states that, given certain conditions, the mean of a large number of iterates of independent random variables, will be approximately normally distributed, regardless of the
- 8 years ago, 1 Dec 2015, 01:36pm -
Sir Bayes: all but not naïve! [Quant Dare]
Is it possible to classify and predict (yes, predict!) if market trends will be bullish, bear or ranged by using a method called “naïve” and based on something as simple as Bayes’ theorem is? Let’s see! Predicting trends with naïve Bayesian classifier Our main objective is to explore
- 8 years ago, 21 Oct 2015, 06:01am -
Correlation and Cointegration [Quant Dare]
I want a strategy that is able to choose the assets that makes it look like an index Yt. -Then take the ones most correlated to it. -Ok, but look: CC1 The Xt and the Xt+c series have exactly the same correlation with Yt -I prefer Xt+c!! -Yes, but I am trying to be very similar to Yt and Xt+c have a
- 8 years ago, 26 Sep 2015, 12:57am -
Dynamic Markowitz Efficient Frontier [Quant Dare]
Markowitz Model is a famous method allocated in the Portfolio Investment Theory. This model provides efficient portfolios, i.e. portfolios with the highest rentability and lowest risk possible through mathematical programming. The set of portfolios composes the efficient frontier. The strategy is
- 8 years ago, 29 Jul 2015, 11:03am -
Confusion matrix & MCC statistic [Quant Dare]
In the field of predictive analytics, a confusion matrix is a table that allows the visualization of the performance of an algorithm whose objective is to predict the classes of a variable. The name “confusion” comes from the fact that it makes it easy to see if the system is mislabelling one
- 8 years ago, 20 Jul 2015, 08:49am -
Prices Convolution, A Practical Approach [Quant Dare]
othing could be further from my intention than to give an extensive mathematical approach to this post but an slightly idea is desirable. In this post we will approach to the problem of convolution from a matricial point of view. Well, what we mean by convolution is about composing 2 different
- 8 years ago, 6 Jul 2015, 06:31am -
Performance and correlated assets [Quant Dare]
It is well known that an efficient portfolio should be comprised by uncorrelated assets. The objective is to cover possible widespread falls of all portfolio’s assets. But, what actually is the negative effect of investing in correlated assets? Does the correlation benefit at anytime? How often
- 8 years ago, 12 Jun 2015, 01:32pm -
Reproducing the S&P500 by clustering [Quant Dare]
Let’s begin with a simple question, Can we use the movement of the main stocks in the S&P500 to predict the index movement?. But… Who are the main stocks ? That’s a good question, maybe the bigger ones, maybe the more bullish of them… so how should we decide who are the most
- 8 years ago, 8 May 2015, 12:41pm -
Size Effect Anomaly [Quant Dare]
There are some anomalies that shake the assumption of efficient market. One of the most studied is related to the size of the companies. Some authors have demonstrated that smaller companies (that is, the ones with smaller market capitalization) tend to outperform larger firms. What could be the
- 9 years ago, 26 Mar 2015, 09:36pm -
Predicting Gold using Currencies [Quant Dare]
The price of gold is a unique and interesting financial series but not an easy one to predict. It is very volatile with large sharp unexpected movements. In this post we analyse its relationship with certain currencies and if they can provide an indication of the direction of the gold movements.
- 9 years ago, 9 Mar 2015, 10:29pm -