Quant Mashup - Quantpedia
Best Performing Value Strategies - Part 2 [Quantpedia]
Value trading strategies have come back into spotlight in recent years. After lackluster performance in years 2018, 2019, 2020, Value has staged a strong comeback in 2021 and also in 2022. With a long history of systematic equity Value strategies, many different variants of the strategy have
- 1 year ago, 8 Jun 2022, 09:12pm -
Introduction and Examples of Monte Carlo Strategy Simulation [Quantpedia]
The Monte Carlo method (Monte Carlo simulations) is a class of algorithms that rely on a repeated random sampling to obtain various scenario results. Monte Carlo simulations are used to predict the probability of different outcomes when it would be difficult to use other approaches such as
- 1 year ago, 30 May 2022, 10:54am -
100-Years of Multi-Asset Trend-Following [Quantpedia]
Trend-following strategies have gained extreme popularity in the recent decade. Almost every asset manager utilizes trend following, or momentum, in some form – whether consciously or subconsciously. We at Quantpedia are convinced that each and every strategy has to be scrutinized thoroughly
- 1 year ago, 27 May 2022, 11:21am -
Extending Historical Daily Commodities Data to 100 years [Quantpedia]
Finding a high-quality data source is crucial for quantitative trading strategies. Also, having a long history is beneficial. Fama & French, for example, offer free historical data for stocks and a variety of factors. However, it is very hard to get good-quality and free data for other asset
- 1 year ago, 25 May 2022, 09:46pm -
Best Performing Value Strategies - Part 1 [Quantpedia]
Value strategies attempting at determining a fair value of an asset are one of the first-ever employed strategies in the markets. We all know about Benjamin Graham and Warren Buffet that are one of the best known examples of Value pioneers. Since then, however, Value strategies have evolved
- 1 year ago, 24 May 2022, 10:16am -
Extending Historical Daily Bond Data to 100 Years [Quantpedia]
Finding a good data source with quality data and long history is one of the greatest challenges in quantitative trading. There definitely are some data sources with very long histories. However, they tend to be on the more expensive side. On the other hand, cheap or free data usually lacks quality
- 1 year ago, 18 May 2022, 12:46pm -
How Does Weighting Scheme Impacts Systematic Equity Portfolios? [Quantpedia]
How often do you think about the weights of the assets in your portfolio? Do you weigh your assets equally, or do you prefer value-weighting? The researchers behind a recent research paper analyzed various weighting schemes and examined their effect on factor strategy return. They studied five
- 1 year ago, 29 Apr 2022, 04:17am -
The Price of Transaction Costs [Quantpedia]
Capturing the systematic premia is the main aim of many quantitative traders. However, investors tend to overlook an important factor when backtesting. Trading costs are an essential part of every trade, and yet even when we consider them, we often only use an approximation. The recent article from
- 2 years ago, 24 Apr 2022, 11:49am -
What's the Best Factor for High Inflation Periods? - Part II [Quantpedia]
This second article offers a different look at high inflation periods, which we already analyzed in What’s the Best Factor for High Inflation Periods? – Part I. In this second part, we look at factor performance during 10-year periods of high inflation. High Inflation Periods As we already
- 2 years ago, 13 Apr 2022, 01:08pm -
What's the Best Factor for High Inflation Periods? - Part I [Quantpedia]
In the past couple of weeks, we have done a few event studies, analyzing events that in one way or another resemble what is happening in the world today. At the beginning of March, we examined Factor Performance in Cold War Crises, and at the end of March, we brought you an article analyzing Nuclear
- 2 years ago, 11 Apr 2022, 12:20pm -
Nuclear Threats and Factor Performance - Takeaway for Russia-Ukraine Conflict [Quantpedia]
The Russian invasion of Ukraine and its repercussions continue to occupy front pages all around the world. The battle situation is very dynamic, but it seems that Ukraine holds ground very well and is even able to execute strong local counter-offensives against Russian forces. That’s definitely
- 2 years ago, 1 Apr 2022, 12:37pm -
What Can We Learn from Insider Trading in the 18th Century? [Quantpedia]
Directors, board members, and large shareholders are just some of those who might have non-public material information about their firm. Even though this information could be easily used to profit by trading their own stocks (stocks of the company they hold information about), this behavior is
- 2 years ago, 22 Mar 2022, 11:29am -
Trend-following and Mean-reversion in Bitcoin [Quantpedia]
Indisputably, trend-following and mean-reversion are two key concepts in quantitative investing or technical analysis. The trend-following proponents suggest a performance continuation and that assets that have performed well will continue to do so. In other words, the trend-following strategies are
- 2 years ago, 15 Mar 2022, 08:52pm -
Factor Performance in Cold War Crises - A Lesson for Russia-Ukraine Conflict [Quantpedia]
The Russia-Ukraine war is a conflict that has not been in Europe since WW2. And it has great implications not only on human lives but also on security prices. It bears numerous characteristics of the cold war crises, where two nuclear powers (Soviet Union and USA/NATO) were often very close to hot
- 2 years ago, 8 Mar 2022, 09:55am -
Beware of Excessive Leverage - Introduction to Kelly and Optimal F [Quantpedia]
Most investors focus solely on the profitability of their investment strategy. And, even though having a profitable strategy is important, it is not everything. There are still numerous other things to consider. One of them is the size of the investment. The investment size can increase or decrease
- 2 years ago, 26 Feb 2022, 09:22pm -
What's the Relation Between Grid Trading and Delta Hedging? [Quantpedia]
Delta hedging is a trading strategy that aims to reduce the directional risk of short option strategy and reach a so-called delta-neutral position. It does so by buying or selling small increments of the underlying asset. Similarly, grid trading is a trading strategy that buys/sells an asset
- 2 years ago, 23 Feb 2022, 07:34pm -
Are There Seasonal Intraday or Overnight Anomalies in Bitcoin? [Quantpedia]
At Quantpedia, we love seasonality effects, and our screener includes several strategies that exploit them. These anomalies are fascinating since they usually offer a favorable risk and reward ratio and are commonly invested only during short periods. Frequently, these strategies are valuable
- 2 years ago, 18 Feb 2022, 10:12am -
How to Utilize Anticipated ETF Rebalances [Quantpedia]
Passive investing enjoys substantial popularity and subsequently attracts the attention of researchers. We blogged about the boom of passive investing and market inelasticity in the past. However, the novel research by Li (2021) examines a different perspective. With the boom of passive investing,
- 2 years ago, 11 Feb 2022, 08:26am -
Should Factor Investors Neutralize the Sector Exposure? [Quantpedia]
Factor investors face numerous choices that do not end even after picking the set of factors. For instance, should they neutralize the factor exposure? If the investor pursues sector neutralization, does the decision depend on a particular factor? Or are the choices different for the long-only
- 2 years ago, 8 Feb 2022, 09:51am -
Introduction to Dollar-Cost Averaging Strategies [Quantpedia]
Most of you have probably heard the saying that somebody “averaged” into or out of his investment position. But what does it exactly mean, and what different dollar-cost averaging strategies exist? We plan to unveil our new “Dollar-Cost Averaging” report for Quantpedia Pro clients next week,
- 2 years ago, 31 Jan 2022, 11:53am -
Factor Performance in Bull and Bear Markets [Quantpedia]
Do common equity factors suffer during bear markets? Undoubtedly, the market factor is a rather unpleasant investment during bear markets, but what about the long-short factors? Are they able to deliver performance? The research paper by Geertsema and Lu (2021) provides several answers and
- 2 years ago, 27 Jan 2022, 09:02pm -
VIX-Yield Curve Cycles May Predict Recessions [Quantpedia]
Equities provide significant long-term returns, but the growth certainly is not constant or even stable. Anyway, this holds for almost every financial asset. Bear markets alternate bull markets, and expansion periods rotate with recession periods. Since recessions and bear markets come hand in hand
- 2 years ago, 23 Jan 2022, 10:30am -
Lottery Effect in ETFs Across Several Asset Classes [Quantpedia]
Indisputably, we are witnesses of an ETF mega boom. From passive to active ETFs, their numbers seem to be ever-increasing. Since these exchange-traded funds can be excellent (accessible, transparent, liquid) instruments, it is a great necessity to examine their possible usage in active and
- 2 years ago, 18 Jan 2022, 01:24am -
Quality Factor in Sector Investing [Quantpedia]
In general, a factor is described as a characteristic that can be associated with a group of assets, and it helps to explain their returns and risks. As noted in the literature focusing on CAPM, the market itself can be viewed as the primer and most significant equity factor. Besides the market
- 2 years ago, 14 Jan 2022, 09:16am -
Top Ten Blog Posts on Quantpedia in 2021 [Quantpedia]
As usual, at this time of the year, let us do a short recapitulation of posts on our blog in the previous 12 months. We have published nearly 70 short analyses of academic papers and our own research articles on this blog in 2021. We want to use this opportunity to summarize 10 of them, which were
- 2 years ago, 2 Jan 2022, 08:38pm -
A Primer on Grid Trading Strategy [Quantpedia]
Grid trading is an automated currency trading strategy where an investor creates a so-called “price grid”. The basic idea of the strategy is to repeatedly buy at the pre-specified price and then wait for the price to rise above that level and then sell the position (and vice versa with shorting
- 2 years ago, 27 Dec 2021, 10:44pm -
Estimating Rebalancing Premium in Cryptocurrencies [Quantpedia]
A long time ago, before elevators were a thing, a simple mechanism was used to get the miners in and out of the mines. This mechanism is called a “Man Engine” (or “Fahrkünst” in German language) and works on a simple principle of two reciprocating ladders and stationary platforms. The two
- 2 years ago, 13 Dec 2021, 09:48pm -
Synthetic Lending Rates Predict Subsequent Market Return [Quantpedia]
It is indisputable that the data are changing financial markets – computing power has increased, allowing to rise the trends of ML/AI and big data (number of possible predictors or granularity) or HFT strategies. Indeed, not all the datasets are worth the time of academics, investors or traders,
- 2 years ago, 9 Dec 2021, 10:43am -
The Quant Cycle - The Time Variation in Factor Returns [Quantpedia]
Although the factors in asset pricing models offer a premium in the long run, they are undergoing bull and bear market cycles in the short term. One would expect that it is due to their connection to the business cycles as the factor premium represents a reward for bearing the macroeconomic risks. A
- 2 years ago, 22 Nov 2021, 07:17pm -
Community Alpha of @QuantConnect – Part 4 [Quantpedia]
This blog post is the continuation (and finale) of series about Quantconnect’s AlphaMarket strategies. This part is related to the multi-factor strategies notoriously known from the majority of asset classes. We continue in the examination of factor strategies built on top of social trading
- 2 years ago, 20 Nov 2021, 08:37am -
How to Combine Different Momentum Strategies [Quantpedia]
Today we will again talk more about the portfolio management theory, and we will focus on techniques for combining quantitative strategies into one multi-strategy portfolio. So, let’s imagine we already have a set of profitable investment strategies, and we need to combine them. The goal of such
- 2 years ago, 15 Nov 2021, 08:06pm -
How News Move Markets? [Quantpedia]
Nobody would argue that nowadays, we live in an information-rich society – the amount of available information (data) is constantly rising, and news is becoming more accessible and frequent. It is indisputable that this evolvement has also affected financial markets. Machine learning algorithms
- 2 years ago, 14 Nov 2021, 07:41pm -
An Introduction to Value at Risk Methodologies [Quantpedia]
Understanding the risks of any quantitative trading strategy is one of the pillars of successful portfolio management. Of course, we can hope for good future performance, but to survive market whipsaws, we must have tools for sound risk management. The “Value at Risk” measure is such a standard
- 2 years ago, 29 Oct 2021, 12:06pm -
What is the Optimal Gold Allocation in a Portfolio? [Quantpedia]
Ray Dalio, the founder of Bridgewater Associates L.P. and the creator of the All-Weather investment strategy, recommends having some gold in a contemporary environment. He states, “In a world of ongoing pressure for policymakers across the globe to print and spend, zero interest rates, tectonic
- 2 years ago, 14 Oct 2021, 11:49am -
Insider Trading: What Happens Behind Closed Doors [Quantpedia]
Corporate insiders often have insight into a company’s private information, which might help them predict how the shares’ price will move in the coming days. However, laws and regulations are designed to keep them from trading based on this knowledge, as it would be unfair and hurt the
- 2 years ago, 11 Oct 2021, 10:53am -
Three Simple Tactical FX Hedging Strategies [Quantpedia]
There are many ways one can lose money when investing, and exchange rates are one of the potential risk factors. Luckily, there are several ways to minimize this type of loss in your portfolio. Systematic tactical FX hedging that uses currency factor strategies (for example currency carry, currency
- 2 years ago, 8 Oct 2021, 11:07am -
How to Use Deep Order Flow Imbalance [Quantpedia]
Order book information is crucial for traders, but it can be complex. With the numbers of stocks listed in stock exchanges, it is impossible to track all the available information for the human mind. Therefore, the order flows could be an interesting dataset for machine learning models. The novel
- 2 years ago, 6 Oct 2021, 10:48am -
Introduction to Clustering Methods In Portfolio Management – Part 3 [Quantpedia]
This is the third and final article from the clustering series. If you’ve missed the previous parts, here you can find the first and second parts of the series. This section examines trading strategies based on previously introduced clustering methods. The complete Portfolio Clustering report will
- 2 years ago, 29 Sep 2021, 09:34pm -
Asset Pricing Models in China [Quantpedia]
The CAPM model was a breakthrough for asset pricing, but the times where the market factor was most widely used are long gone. Nowadays, if we exaggerate a bit, we have as many factors as we want. Therefore, it might not be straightforward which factor model should be used. Hanauer et al. (2021)
- 2 years ago, 27 Sep 2021, 09:45pm -
Introduction to Clustering Methods In Portfolio Management - Part 1 [Quantpedia]
At the beginning of October, we plan to introduce for our Quantpedia Pro clients a new Quantpedia Pro report dedicated to clustering methods in portfolio management. The theory behind this report is more extensive; therefore, we have decided to split the introduction into our methodology into three
- 2 years ago, 16 Sep 2021, 10:07pm -
How to Use Lexical Density of Company Fillings [Quantpedia]
The application of alternative data is currently a strong trend in the investment industry. We, too, analyzed few datasets in the past, be it ESG data, sentiment, or company fillings. This article continues the exploration of the alt-data space. This time, we use the research paper by Joenväärä
- 2 years ago, 10 Sep 2021, 11:49am -
A New Return Asymmetry Investment Factor in Commodity Futures [Quantpedia]
As mentioned several times, Quantpedia is a big fan of transferring ideas from one asset class to another. This article is another example; we use an idea originally tested on Chinese stocks and apply it to the commodity futures investment universe. The resultant return new asymmetry investment
- 2 years ago, 8 Sep 2021, 09:09pm -
The Best Systematic Trading Strategies in 2021: Part 3 [Quantpedia]
Finally, what are the five top-performing quantitative trading strategies in 2021? In part 1 of our article, we analyzed tendencies and trends among the Top 10 quantitative strategies of 2021. Thanks to Quantpedia Pro’s screener, we published several interesting insights about them. In part 2 of
- 2 years ago, 30 Aug 2021, 10:52am -
How to Use Exotic Assets to Improve Your Trading Strategy [Quantpedia]
As we have mentioned several times, the best course of action for a quant analyst who wants to develop a new trading strategy is to understand a well-known investment anomaly/factor fundamentally and then improve it. Quantpedia is a big fan of transferring ideas derived from academic research from
- 2 years ago, 26 Aug 2021, 12:57pm -
The Best Systematic Trading Strategies in 2021: Part 2 [Quantpedia]
The year 2021 has been an incredible year for passive equity investors so far. However, in the first part of our article, we talked about quantitative strategies which achieved even better results in 2021 than passive US equity investors. Indeed, there do exist such strategies, at least definitely
- 2 years ago, 23 Aug 2021, 10:32pm -
Community Alpha of QuantConnect - Part 2: Social Trading Factor Strategies [Quantpedia]
This blog post is the continuation of series about Quantconnect´s Alpha market strategies. This part is related to the factor strategies notoriously known from the majority of asset classes. Although the results are insightful, they are not straightforward, and further analysis could be made.
- 2 years ago, 13 Aug 2021, 10:44am -
Five Small Shards of Insight Hidden in Data [Quantpedia]
Around a month ago, we launched a series of short videos called “Quantpedia Explains“, in which we plan to show and explain some of the themes out of quantitative finance that we think are worth mentioning. We have started with a quick intro to individual Quantpedia Pro reports, and now, we have
- 2 years ago, 29 Jul 2021, 11:15am -
Man vs. Machine: Stock Analysis [Quantpedia]
Nowadays, we see an increasing number of machine learning based strategies and other related financial analyses. But can the machines replace us? Undoubtedly, AI algorithms have greater capacities to “digest” big data, but as always in the markets, everything is not rational. Cao et al. (2021)
- 2 years ago, 18 Jul 2021, 12:45pm -
Introduction to CPPI - Constant Proportion Portfolio Insurance [Quantpedia]
As we have promised, we present a short article as an introduction into the methodology of the Quantpedia Pro CPPI reports. Quantpedia Pro clients can use the model portfolio built in the Portfolio Manager as a risky asset to test various variants – Basic CPPI, Drawdown Based CPPI and Dynamic
- 2 years ago, 9 Jul 2021, 01:32pm -
Community Alpha of @QuantConnect - Part 1: Following numerous quantitative strategies [Quantpedia]
Nowadays, social media are involved in fields that were unimaginable in the past. Among others, the world of finance, trading and investing is no exception. For example, Stocktwits is a strong community in this area, Seeking Alpha connects (non)professional analysts, and Twitter connects
- 2 years ago, 1 Jul 2021, 08:23pm -