Quant Mashup - Quantpedia
Working with High-Frequency Tick Data - Cleaning the Data [Quantpedia]
Tick data is the most granular high-frequency data available, and so is the most useful in market microstructure analysis. Unfortunately, tick data is also the most susceptible to data corruption and so must be cleaned and conditioned prior to being used for any type of analysis. This article,
- 4 years ago, 17 Apr 2020, 12:09pm -
How Do Investment Strategies Perform After Publication? [Quantpedia]
In many academic fields like physics, chemistry or natural sciences in general, laws do not change. While economics and theory of investing try to find rules that would be true and always applicable, it is not that simple, there is a “complication“ – human. Psychology of humans is very
- 4 years ago, 9 Apr 2020, 09:09pm -
YTD Performance of Equity Factors [Quantpedia]
Actual situation on financial markets changes extremely fast. At the time we are writing this blog post (Monday morning at 23rd of March) we have End-of-Day data to Friday’s close (20th of March) and a few hours of trading action from Monday and VIX currently stands over 70. Markets are in
- 5 years ago, 24 Mar 2020, 11:14am -
Bitcoin in a Time of Financial Crisis [Quantpedia]
This is the article we had prepared around 1-2 weeks ago (data sample starts in October 2014 and ends on 4th of March 2020). But then coronavirus hit our country (Slovak Republic), and we were doing a lot of crisis management tasks and therefore were not able to publish it on time. Now, after the
- 5 years ago, 16 Mar 2020, 09:03pm -
What is the Bitcoin's Risk-Free Interest Rate? [Quantpedia]
Cryptocurrencies, and most notably Bitcoin, are recognized as decentralized currencies. While some see Bitcoin (BTC) as a payment method of the future, others see it as a speculative asset class. No doubt, many have gained on the skyrocketing prices of BTC, but note that many have lost. Despite the
- 5 years ago, 7 Feb 2020, 11:13am -
Pre-Election Drift in the Stock Market [Quantpedia]
There are many calendar / seasonal anomalies by which we can enhance our overall investment strategy. One of the least frequent but still very interesting anomalies is for sure the Pre-Election Drift in the stock market in the United States. This year is the election year, and public discussion is
- 5 years ago, 23 Jan 2020, 11:50am -
Top Ten Blog Posts on Quantpedia in 2019 [Quantpedia]
The end of the year is a good time for a short recapitulation. Apart from other things we do (which we will summarize in our next blog in a few days), we have published around 50 short blog posts / recherches of academic papers on this blog during the last year. We want to use this opportunity to
- 5 years ago, 30 Dec 2019, 12:06pm -
Why Did Trend-Following Underperform Last Decade? [Quantpedia]
Trend-following funds and strategies were once extremely popular after the 2008/2009 crisis. They offered attractive performance, and diversification properties made them a nice addition to investor’s portfolios. Ten years later, “trend-following strategy” is not such a popular word.
- 5 years ago, 22 Dec 2019, 04:14pm -
Quant's Look on ESG Investing Strategies [Quantpedia]
ESG Investing (sometimes called Socially Responsible Investing) is becoming a current trend, and its proponents characterize it as a modern, sustainable, and responsible way of investing. Some people love it, others see it as just another fad that will soon be forgotten. We at Quantpedia have
- 5 years ago, 13 Dec 2019, 08:22am -
How to Choose the Best Period for Indicators [Quantpedia]
Academic literature recognizes a large set of indicators or factors that are connected with the various assets. These indicators can be utilized in a variety of trading strategies, which means that such indicators are popular among practitioners who seek to invest their funds. Usually, the
- 5 years ago, 3 Dec 2019, 02:16pm -
Calendar / Seasonal Trading and Momentum Factor [Quantpedia]
We are continuing in our short series of articles about calendar / seasonal trading. In our previous work, we have examined various calendar / seasonal equity trading strategies. In this study, we aim to take this composite calendar strategy as a building block and add another block to enhance the
- 5 years ago, 29 Oct 2019, 07:30pm -
Momentum Explains a Bunch Of Equity Factors [Quantpedia]
Financial academics have described so many equity factors that the whole universe of them is sometimes called “factor zoo”. Therefore, it is no surprise that there is a quest within an academic community to bring some order into this chaos. An interesting research paper written by Favilukis and
- 5 years ago, 11 Oct 2019, 10:14am -
Continuous Futures Contracts Methodology for Backtesting [Quantpedia]
The problem with spliced futures No doubt, the correct datasets are the key when one does some analysis in the financial markets. For some financial instruments, the data can be found for free and ready for the upcoming process, but on the other hand, some instruments are more complicated. Nowadays,
- 5 years ago, 3 Oct 2019, 05:55pm -
Case Study: Quantpedia's Composite Seasonal / Calendar Strategy [Quantpedia]
Despite the economical theory states that financial markets are efficient and investors are rational, a large ammount of research is about anomalies, where the result is different from the theoretical expectation. At Quantpedia, we deal with anomalies in the financial markets and we have identified
- 5 years ago, 29 Apr 2019, 10:47am -
A Portfolio of Leveraged Exchange Traded Funds vs. Benchmark Asset Allocation [Quantpedia]
A new interesting financial research paper gives an idea to build a diversified portfolio of leveraged ETFs (scaled down to have the same risk as a benchmark asset allocation built from a non-leveraged ETFs) to beat benchmark asset allocation. However, caution is needed as the most of the
- 6 years ago, 5 Dec 2018, 12:41pm -
Too Much Arbitrage Contributes to Overreaction in Post Earnings Announcement Drift [Quantpedia]
A new financial research paper has been published and is related to all equity long short strategies but mainly to: #33 - Post-Earnings Announcement Effect Authors: Li Title: Does Too Much Arbitrage Destablize Stock Price? Evidence from Short Selling and Post Earnings Announcement Drift. Link:
- 6 years ago, 10 Nov 2018, 05:59am -
Historical Returns for US Bonds since 1793 [Quantpedia]
We have mentioned it several times - we are quants but we love history and we love research papers like this: Author: McQuarrie Title: The First Eighty Years of the US Bond Market: Investor Total Return from 1793, Combining Federal, Municipal, and Corporate Bonds Link:
- 6 years ago, 5 Nov 2018, 08:32am -
Equity Factors in Emerging Markets [Quantpedia]
This study investigates the relation between a comprehensive set of firm-specific attributes and future equity returns for a sample of stocks from 27 emerging markets. Univariate analyses based on equal-weighted portfolio returns reveal that the low beta, firm size, book-to-market ratio, momentum
- 6 years ago, 6 Sep 2018, 09:53am -
Enhanced Factor Portfolios [Quantpedia]
We dissect the performance of factor-based equity portfolios using a characteristics-based multi-factor expected return model. We show that generic single-factor portfolios, which invest in stocks with high scores on one particular factor, are sub-optimal, because they ignore the possibility that
- 6 years ago, 31 Aug 2018, 10:22am -
What Works (and Doesn't Work) in Cryptocurrencies [Quantpedia]
If behavioral biases explain asset pricing anomalies, they should also materialize in cryptocurrency markets. I test more than 20 stock return anomalies based on daily cryptocurrency data, and document strong evidence of price momentum. Unlike stock markets, price reversal and risk-based anomalies
- 6 years ago, 24 Aug 2018, 08:12am -
Size, Value and Equity Premium Waves [Quantpedia]
This paper examines the link between microeconomic uncertainty and the size premium across different frequencies in an investment model with heterogeneous firms. We document that the observed time-varying dispersion in firm-specific productivity can account for a large size premium in the
- 6 years ago, 15 Aug 2018, 11:11pm -
An Extensive Test of Market Timing Strategies in the Gold Market [Quantpedia]
While the literature on gold is dominated by studies on its diversification, hedging, and safe haven properties, the question “When to invest in gold?” is generally not analyzed in much detail. We test more than 4,000 seasonal, technical, and fundamental timing strategies for gold. While we find
- 6 years ago, 6 Aug 2018, 11:30am -
Predictability of Betting-Against-Beta Factor [Quantpedia]
The leverage aversion theory implies that returns to the betting-against-beta (BAB) strategy are predictable by past market returns: An outward shift in investors' aggregate demand function simultaneously increases market prices and increases the expected future BAB return. I confirm the
- 6 years ago, 30 Jul 2018, 09:39pm -
A Very Influential Paper About Tether-Bitcoin Relationship (Manipulation?) [Quantpedia]
This paper investigates whether Tether, a digital currency pegged to U.S. dollars, influences Bitcoin and other cryptocurrency prices during the recent boom. Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable
- 6 years ago, 19 Jul 2018, 10:16am -
Arbitrage Opportunities in Cryptocurrency Markets [Quantpedia]
This paper studies the efficiency and price formation of bitcoin and other cryptocurrency markets. First, there are large recurrent arbitrage opportunities in cryptocurrency prices relative to fiat currencies across exchanges that often persist for several days or weeks. These price dispersions
- 6 years ago, 10 Jul 2018, 08:35pm -
The Impact of Volatility Targeting on Equities, Bonds, Commodities and Currencies [Quantpedia]
Recent studies show that volatility-managed equity portfolios realize higher Sharpe ratios than portfolios with a constant notional exposure. We show that this result only holds for “risk assets”, such as equity and credit, and link this to the so-called leverage effect for those assets. In
- 6 years ago, 5 Jul 2018, 06:52am -
Returns to Investors in Initial Coin Offerings [Quantpedia]
Initial coin offerings (ICOs), sales of cryptocurrency tokens to the general public, have recently been used as a source of crowdfunding for startups in the technology and blockchain industries. We create a dataset on 4,003 executed and planned ICOs, which raised a total of $12 billion in capital,
- 6 years ago, 25 Jun 2018, 09:35am -
Are Currently Used Significance Levels for Investment Strategies Too Strict? [Quantpedia]
Most papers in the financial literature estimate the p-value associated with an investment strategy, without reporting the power of the test used to make that discovery. This is a mistake, because a particularly low false positive rate (Type I error) may be achieved at the expense of missing a large
- 6 years ago, 19 Jun 2018, 12:20pm -
Are Investors Becoming Better at Fund Picking? [Quantpedia]
This study analyzes how the determinants of mutual fund investor cash flows have changed over time, and the associated impact on investor returns. Using data from 1992-2016 we find that investor return-chasing behavior essentially disappeared starting in 2011. Investor flows have become more
- 6 years ago, 15 Jun 2018, 11:08pm -
Currency Management with FX Style Factors [Quantpedia]
Currency hedging is often approached with an all-or-nothing mentality: either full hedging of all foreign exchange (FX) positions or no hedging at all. As a more nuanced alternative, we suggest systematically harvesting the benefits of the FX style factors carry, value and momentum. In particular,
- 6 years ago, 5 Jun 2018, 09:22am -
Short-Term Return Reversals and Intraday Transactions [Quantpedia]
I examine whether a short-term reversal is attributed to past intraday or overnight price movements. The results show that intraday returns significantly reverse in the following week, while overnight returns do not, indicating that the short-term reversal is attributed to past intraday price
- 6 years ago, 29 May 2018, 10:25am -
Interesting Insights into Trend-Following Strategies [Quantpedia]
Because of the adaptive nature of position sizing, trend-following strategies can generate the positive skewness of their returns, when infrequent large gains compensate overall for frequent small losses. Further, trend-followers can produce the positive convexity of their returns with respect to
- 6 years ago, 23 May 2018, 07:53am -
Seasonal Strategy on US Equities + Genovest tests Quantpedia strategy [Quantpedia]
We revisit a series of popular anomalies: seasonal, announcement and momentum. We comment on statistical significance and persistence of these effects and propose useful investment strategies to incorporate this information. We investigate the creation of a seasonal anomaly and trend model composed
- 6 years ago, 9 May 2018, 11:25am -
Bitcoin Is Not the New Gold [Quantpedia]
Cryptocurrencies such as Bitcoin are establishing themselves as an investment asset and are often named the New Gold. This study, however, shows that the two assets could barely be more different. Firstly, we analyze and compare conditional variance properties of Bitcoin and Gold as well as other
- 6 years ago, 30 Apr 2018, 10:48am -
There Exist Two Different Accruals Anomalies [Quantpedia]
We document that several well known asset-pricing implications of accruals differ for investment and non-investment-related components. Exposure to an investment-accruals factor explains the cross-section of returns better than the accruals themselves, and this factor’s returns are negatively
- 6 years ago, 24 Apr 2018, 12:15pm -
The Day of the Week Effect in the Crypto Currency Market [Quantpedia]
This paper examines the day of the week effect in the crypto currency market using a variety of statistical techniques (average analysis, Student's t-test, ANOVA, the Kruskal-Wallis test, and regression analysis with dummy variables) as well as a trading simulation approach. Most crypto
- 6 years ago, 16 Apr 2018, 09:32am -
Problems with a Long Horizon Predictability [Quantpedia]
Long-horizon return regressions have effectively small sample sizes. Using overlapping long-horizon returns provides only marginal benefit. Adjustments for overlapping observations have greatly overstated t-statistics. The evidence from regressions at multiple horizons is often misinterpreted. As a
- 6 years ago, 10 Apr 2018, 10:25pm -
What is Bitcoin's Fair Value? [Quantpedia]
We develop a strong diagnostic for bubbles and crashes in bitcoin, by analyzing the coincidence (and its absence) of fundamental and technical indicators. Using a generalized Metcalfe’s law based on network properties, a fundamental value is quantified and shown to be heavily exceeded, on at least
- 6 years ago, 4 Apr 2018, 12:52pm -
How Algo Trading Reacts to Market Stress [Quantpedia]
A key issue raised by the rapid growth of computerised algorithmic trading is how it responds in extreme situations. Using data on foreign exchange orders and transactions that includes identification of algorithmic trading, we find that this type of trading contributed to the deterioration of
- 7 years ago, 28 Mar 2018, 10:00am -
Liquidity Creation in a Short-Term Reversal Strategies and Volatility Risk [Quantpedia]
We show, both theoretically and empirically, that liquidity creation induces negative exposure to volatility risk. Intuitively, liquidity creation involves taking positions that can be exploited by privately informed investors. These investors' ability to predict future price changes makes
- 7 years ago, 22 Mar 2018, 01:18pm -
Is Equity Pairs Trading Profitable Due to Cointegration? [Quantpedia]
We study the theoretical implications of cointegrated stock prices on the profitability of pairs trading strategies. If stock returns are fairly weakly correlated across time, cointegration implies very high Sharpe ratios. To the extent that the theoretical Sharpe ratios are "too large,"
- 7 years ago, 14 Mar 2018, 10:45am -
Solvency Risk Premia and the Carry Trades [Quantpedia]
This paper shows that currency carry trades can be rationalized by the time-varying risk premia originating from the sovereign solvency risk. We find that solvency risk is a key determinant of risk premia in the cross section of carry trade returns, as its covariance with returns captures a
- 7 years ago, 8 Mar 2018, 06:24pm -
Mixed Copula Pairs Trading Strategy [Quantpedia]
We carry out a study to evaluate and compare the relative performance of the distance and mixed copula pairs trading strategies. Using data from the S&P 500 stocks from 1990 to 2015, we find that the mixed copula strategy is able to generate a higher mean excess return than the traditional
- 7 years ago, 21 Feb 2018, 04:30pm -
Price Overreactions in the Cryptocurrency Market [Quantpedia]
This paper examines price overreactions in the case of the following cryptocurrencies: BitCoin, LiteCoin, Ripple and Dash. A number of parametric (t-test, ANOVA, regression analysis with dummy variables) and non-parametric (Mann–Whitney U test) tests confirm the presence of price patterns after
- 7 years ago, 14 Feb 2018, 01:36pm -
Low Risk Anomaly in Banking Industry and Its Implications [Quantpedia]
Traditional capital structure theory in frictionless and efficient markets predicts that reducing banks’ leverage reduces the risk and cost of equity but does not change the overall weighted average cost of capital (and thus the rates for borrowers). We test these two predictions. We confirm that
- 7 years ago, 12 Feb 2018, 11:30am -
Can Momentum Investing Be Saved? [Quantpedia]
On paper, momentum is one of the most compelling factors: simulated portfolios based on momentum add remarkable value, in most time periods and in most asset classes, all over the world. So, our title may seem unduly provocative. However, live results for mutual funds that take on a momentum factor
- 7 years ago, 3 Feb 2018, 02:37pm -
Are There Any Simple Calendar Effects in Bitcoin Market? [Quantpedia]
There is a large literature that reports time-specific anomalies in equity markets such as the Monday effect, the January effect and the Halloween effect. This study is the first to report intra-day time-of-day, day-of-week, and month-of-year effects for Bitcoin returns and trading volume. Using
- 7 years ago, 24 Jan 2018, 07:20pm -
Crash Sensitivity Explains the Momentum Effect in Stocks [Quantpedia]
This paper proposes a risk-based explanation of the momentum anomaly on equity markets. Regressing the momentum strategy return on the return of a self-financing portfolio going long (short) in stocks with high (low) crash sensitivity in the USA from 1963 to 2012 reduces the momentum effect from a
- 7 years ago, 18 Jan 2018, 11:30am -
Deep Learning Insights for Factor Investing [Quantpedia]
Deep learning is an active area of research in machine learning. I train deep feedforward neural networks (DFN) based on a set of 68 firm characteristics (FC) to predict the US cross-section of stock returns. After applying a network optimization strategy, I find that DFN long-short portfolios can
- 7 years ago, 4 Jan 2018, 09:15am -
Persistance in Cryptocurrencies [Quantpedia]
This paper examines persistence in the cryptocurrency market. Two different longmemory methods (R/S analysis and fractional integration) are used to analyse it in the case of the four main cryptocurrencies (BitCoin, LiteCoin, Ripple, Dash) over the sample period 2013-2017. The findings indicate that
- 7 years ago, 29 Dec 2017, 09:43pm -