Quant Mashup
Quantocracy is now on Bluesky and Threads. See the links in the header. - Mike
Correlation and correlation structure (3), estimate tail dependence using regression [Eran Raviv]
What is tail dependence really? Say the market had a red day and saw a drawdown which belongs with the 5% worst days (from now on simply call it a drawdown): weekly SPY returns One can ask what is now, given that the market is in the blue region, the probability of a a drawdown in a specific stock?
- 9 years ago, 11 Nov 2015, 01:47am -
Random data: Evaluating [Investment Idiocy]
Everyone hates drawdowns (those periods when you're losing money whilst trading). If only there was a way to reduce their severity and length.... Quite a few people seem to think that "trading the equity curve" is the answer. The basic idea is that when you are doing badly, you reduce
- 9 years ago, 10 Nov 2015, 12:58pm -
How Monday’s Strong Drop May Be Setting SPX Up For A Bounce [Quantifiable Edges]
When a market has already sold off for multiple days and the selling accelerates that can often mark a point where a bounce becomes likely. Monday’s selling triggered the Quantifinder study below. All stats are updated. 2015-11-10 image1 These results appear extremely compelling. The consistency
- 9 years ago, 10 Nov 2015, 12:57pm -
Making Time (Even More of) an Investor's Best Friend [EconomPic]
Ben Carlson of A Wealth of Common Sense blog (and author of a great book by the same name), had a recent post Playing the Probabilities outlining that time has been an investor's best friend (for those investors that have had in some cases quite a bit of time), pointing to the following table.
- 9 years ago, 10 Nov 2015, 04:58am -
I bought corporate bonds and all I got was this stupid currency exposure [Flirting with Models]
Summary In the current “Fed on / Fed off” market environment, dollar exposure matters Currency hedged exposures have exploded in popularity in the equity space Using the experience of Canadian investors, we demonstrate the large impact that currency can have on fixed income Investors buying
- 9 years ago, 10 Nov 2015, 04:58am -
A Filter Selection Method Inspired From Statistics [QuantStrat TradeR]
This post will demonstrate a method to create an ensemble filter based on a trade-off between smoothness and responsiveness, two properties looked for in a filter. An ideal filter would both be responsive to price action so as to not hold incorrect positions, while also be smooth, so as to not incur
- 9 years ago, 9 Nov 2015, 12:59pm -
Build Better Strategies! [Financial Hacker]
Enough blog posts, papers, and books deal with how to properly optimize and test trading systems. But there is little information about how to get to such a system in the first place. The described strategies often seem to have appeared out of thin air. Does a trading system require some sort of
- 9 years ago, 9 Nov 2015, 12:59pm -
The World's Longest Trend-Following Backtest [Alpha Architect]
Were in the middle of an academic research project and we ran a simple long-term trend-following model from January 1, 1801 to September 30, 2015. Recently, there has been some research on the performance of trend rules over long periods here (and highlighted by CXO here). Our trend-following
- 9 years ago, 9 Nov 2015, 12:58pm -
Unsupervised candlestick classification for fun and profit - part 1 [Robot Wealth]
Candlestick patterns were used to trade the rice market in Japan back in the 1800's. Steve Nison popularised the idea in the western world and claims that the technique, which is based on the premise that the appearance of certain patterns portend the future direction of the market, is
- 9 years ago, 9 Nov 2015, 12:58pm -
[Academic Paper] Note on Correlation of First Differences of Averages in a Random Chain [@Quantivity]
Note on Correlation of First Differences of Averages in a Random Chain
- 9 years ago, 9 Nov 2015, 12:57pm -
[Academic Paper] Multi-Scale and Hidden Resolution Time Series Models [@Quantivity]
Multi-Scale and Hidden Resolution Time Series Models
- 9 years ago, 9 Nov 2015, 12:57pm -
[Academic Paper] Multi-scale Random Field Models [@Quantivity]
Multi-scale Random Field Models
- 9 years ago, 9 Nov 2015, 12:57pm -
[Academic Paper] Multi-Scale Stochastic Modeling of Dynamics of a Time-Averaged Variable [@Quantivity]
Multi-Scale Stochastic Modeling of Dynamics of a Time-Averaged Variable
- 9 years ago, 9 Nov 2015, 12:56pm -
Best Links of the Week [Quantocracy]
The best quant mashup links for the week ending Saturday, 11/07 as voted by our readers: Using random data [Investment Idiocy] The Overnight Trading Anomaly in SPY and a Few Notes About Backtesting in R [Price Action Lab] GMO Flows Turn Negative – An Ominous Sign for Risk Taking [EconomPic] The
- 9 years ago, 9 Nov 2015, 02:33am -
Interview with Laurent Bernut [Better System Trader]
Laurent Bernut was a systematic short seller with Fidelity for 8 years. His mandate was to underperform the longest bear market in modern history: Japanese equities. Prior to that, he worked in the Hedge Fund world for 5 years. He now runs an automated Forex strategy and travels the world with his
- 9 years ago, 8 Nov 2015, 02:26pm -
Asynchronicity & Performance - 'JavaScript for Financial Analysts' Chapter 7 [John Orford]
First draft of 'JavaScript for Financial Analysts' Chapter 7. ~ We are all waiting for something, and our computers are no different. Computers are built on four building blocks. CPUs, memory, hard disk and network. Our programs are only as fast as the slowest component. To put
- 9 years ago, 8 Nov 2015, 02:26pm -
[Academic Paper] Risk Premia: Asymmetric Tail Risks and Excess Returns [@Quantivity]
Risk Premia: Asymmetric Tail Risks and Excess Returns
- 9 years ago, 8 Nov 2015, 02:25pm -
[Academic Paper] Dynamics of Expected Returns: Evidence from Multi-Scale Time Series Modeling [@Quantivity]
Dynamics of Expected Returns: Evidence from Multi-Scale Time Series Modeling
- 9 years ago, 8 Nov 2015, 02:25pm -
[Academic Paper] Anchoring Adjusted Capital Asset Pricing Model [@Quantivity]
Anchoring Adjusted Capital Asset Pricing Model
- 9 years ago, 8 Nov 2015, 02:24pm -
[Academic Paper] Idiosyncratic Volatility, Momentum, Liquidity, and Expected Stock Returns in Developed and Emerging Markets [@Quantivity]
Idiosyncratic Volatility, Momentum, Liquidity, and Expected Stock Returns in Developed and Emerging Markets
- 9 years ago, 8 Nov 2015, 02:24pm -
[Academic Paper] Over or Under? Momentum, Idiosyncratic Volatility and Overreaction [@Quantivity]
Over or Under? Momentum, Idiosyncratic Volatility and Overreaction
- 9 years ago, 8 Nov 2015, 02:24pm -
Gap Pattern | Trading Strategy (Filter & Exit) [Oxford Capital]
I. Trading Strategy Concept: Short-term momentum patterns with a trend filter. Source: Dahlquist, J. R., Bauer, R. J. (2012). Technical Analysis of Gaps. New Jersey: Pearson Education, Inc. Research Goal: Performance verification of the Gap Pattern. Specification: Table 1. Results: Figure 1-2. Trade
- 9 years ago, 8 Nov 2015, 03:20am -
Screening Using False-Discovery Rates [Alex Chinco]
1. Motivating Example Jegadeesh and Titman (1993) show that, if you rank stocks according to their returns over the previous 12 months, then the past winners will outperform the past losers by 1.5{\scriptstyle \%} per month over the next 3 months. But, the authors don’t just test this particular
- 9 years ago, 6 Nov 2015, 03:46pm -
Dividends An Illogical Preference [Larry Swedroe]
A large body of literature examines whether managers of actively managed funds add value to their investors by generating abnormal returns. Unfortunately, not only do the vast majority fail to do so, but the evidence, as presented in my book, “The Incredible Shrinking Alpha,” demonstrates that
- 9 years ago, 6 Nov 2015, 03:45pm -
GMO Flows Turn Negative - An Ominous Sign for Risk Taking [EconomPic]
I have a ton of respect for the way in which GMO manages money (their guts to be massively contrarian if that is their view) and I think their thought leadership is about as good as it gets in the industry. That said, I have long had an issue in the way in which they think about investor behavior
- 9 years ago, 5 Nov 2015, 08:09pm -
Daylight is Bad for Gold Stocks (Apparently) [Jay On The Markets]
Well, at least as far as I can tell. To understand what I am talking about consider the following results generated using daily open/high/low/close data for ticker GDX (an ETF that tracks gold mining stocks). Figure 1 displays the cumulative $ gain/loss achieved by holding 100 shares of ticker GDX
- 9 years ago, 5 Nov 2015, 02:44pm -
Deconstructing the Low-Volatility Anomaly [Quantpedia]
We study several aspects of the so-called low-vol and low-beta anomalies, some already documented (such as the universality of the effect over different geographical zones), others hitherto not clearly discussed in the literature. Our most significant message is that the low-vol anomaly is the
- 9 years ago, 5 Nov 2015, 02:44pm -
SPX Straddle - 80 DTE - Results Summary [DTR Trading]
Over the last five blog posts we looked at the automated backtest results for 4040 options straddles sold on the S&P 500 Index (SPX) at 80 days-to-expiration (DTE). Eight different loss approaches were tested on these straddles. On top of these eight loss approaches, tests were conducted with no
- 9 years ago, 5 Nov 2015, 02:43pm -
The Trinity Portfolio [Meb Faber]
We examined 15 famous asset allocation strategies in my last book Global Asset Allocation. (If you haven’t read it yet I’ll send you a free copy.) I would like to have included a lot more tactical ideas in the book but there is a constant struggle between keeping an idea/book simple, but
- 9 years ago, 5 Nov 2015, 04:55am -
Accessing Bitcoin Data with R [Revolutions]
I am not yet a Bitcoin advocate. Nevertheless, I am impressed with the amount of Bitcoin activity and the progress that advocates are making towards having Bitcoin recognized as a legitimate currency. Right now, I am mostly interested in the technology behind bitcoin and the possibility of working
- 9 years ago, 5 Nov 2015, 04:54am -
Tactical Alpha in Theory and Practice (Part II): Principal Component Analysis [GestaltU]
In Part I of this series, we explored Grinold's Fundamental Law of Active Management, and why the theory leads to misguided conclusions in the presence of asset correlations. In this article we will offer a primer on a useful tool for portfolio evaluation, Principal Component Analysis (PCA),
- 9 years ago, 4 Nov 2015, 01:36pm -
Using random data [Investment Idiocy]
As you might expect I spend quite a lot of my time using real financial data - asset prices and returns; and returns from live and simulated trading. It may surprise you to know that I also spend time examining randomly created financial data. This post explains why. I also explain how to generate
- 9 years ago, 4 Nov 2015, 01:36pm -
3 Common Backtesting Traps With Easy Solutions [Capital Spectator]
Backtests have become the weapon of choice for rationalizing various forms of tactical asset allocation, which has become increasingly popular as a risk-management tool since the 2008 crash. The hazards of backtesting—studying how a strategy performed in the past–are well known, which leads some
- 9 years ago, 4 Nov 2015, 01:35pm -
An interesting look at the size anomaly [Alpha Architect]
Many of you are probably aware of the paper from AQR entitled, “Size Matters: When you control for your junk.” We loved the title so much we considered it one of our Top 5 Geeky, Yet Funny, Economic Paper Titles. Of course, great papers often go unread beyond the abstract because they are a bit
- 9 years ago, 4 Nov 2015, 01:35pm -
False Discovery Rate [Henry Carstens]
Good article on False Discovery Rate – the probability that a significant p-value indicates a true effect and one of the reasons that quant tests and systems generally underperform. For example, Market Stress and Market Stress Automations generally test out at around 85% wins. In real life they
- 9 years ago, 3 Nov 2015, 11:18pm -
Fetching options data from NASDAQ website with Python [Quant Corner]
Below is a piece of Python code allowing to download option chains from NASDAQ website. It is basically a big main function relying heavily on BeautifulSoup and wrapped into a class (‘c’est chic’). User provides the ticker, expiry, option type, etc… and is returned option data for all
- 9 years ago, 3 Nov 2015, 01:40am -
A Very Simple Model for Pricing VIX Futures [Six Figure Investing]
Serious volatility watchers are always attending a three ring circus. The left ring holds the general market. Center ring has options on the S&P 500 and the various CBOE VIX® style indexes and to the right are VIX futures, Volatility Exchange Traded Products like VXX, UVXY, TVIX, and XIV plus
- 9 years ago, 2 Nov 2015, 02:45pm -
Statistics behind Pair Trading (II): Entry and Exit points [Quant Insti]
In the previous post on this topic, we discussed the challenges and statistics involved in selecting a pair of stocks for statistical arbitrage. We understood how by using the co-integration tests we can say within a certain level of confidence interval that the spread between the two stocks is a
- 9 years ago, 2 Nov 2015, 12:43pm -
Strong Down Month for the State of Trend Following [Wisdom Trading]
October 2015: Trend Following DOWN -9.19% - YTD: +3.36% A strong downward move at the beginning of the month weighed heavily on the index, which did not recover and went on to post its worst return of the year. The YTD performance is still in the black. Below is the full State of Trend Following
- 9 years ago, 2 Nov 2015, 12:43pm -
State of Trend Following in October [Au Tra Sy]
The State of Trend Following index posted a strong negative return in October. Enough to take the YTD performance in the red, with another volatile oscillation around the neutral line for 2015. Please check below for more details. Detailed Results The figures for the month are: October return:
- 9 years ago, 2 Nov 2015, 12:42pm -
Ivy Portfolio November Update [Scott's Investments]
The Ivy Portfolio spreadsheet track the 10 month moving average signals for two portfolios listed in Mebane Faber's book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that have trading signals based on
- 9 years ago, 2 Nov 2015, 12:42pm -
[Academic Paper] Networks of Equities in Financial Markets [@Quantivity]
Networks of Equities in Financial Markets
- 9 years ago, 2 Nov 2015, 12:42pm -
[Academic Paper] Network Perspective of the Stock Market [@Quantivity]
Network Perspective of the Stock Market
- 9 years ago, 2 Nov 2015, 12:42pm -
[Academic Paper] Emergence of Statistically Validated Financial Intraday Lead-Lag Relationships [@Quantivity]
Emergence of Statistically Validated Financial Intraday Lead-Lag Relationships
- 9 years ago, 2 Nov 2015, 12:41pm -
[Academic Paper] Evolution of Worldwide Stock Markets, Correlation Structure and Correlation Based Graphs [@Quantivity]
Evolution of Worldwide Stock Markets, Correlation Structure and Correlation Based Graphs
- 9 years ago, 2 Nov 2015, 12:41pm -
[Academic Paper] Equity Returns at Turn of the Month [@Quantivity]
Equity Returns at Turn of the Month
- 9 years ago, 2 Nov 2015, 12:40pm -
Best Links of the Week [Quantocracy]
The best quant mashup links for the week ending Saturday, 10/31 as voted by our readers: The Cold Blood Index [Financial Hacker] How to Write a Great Quant Blog [Quant Start] High Frequency Market Microstructure: Part 1 (Microstructure Noise) [Portfolio Effect] Buy the Winners [Systematic Relative
- 9 years ago, 1 Nov 2015, 12:11pm -
The Financial Hacker’s Cold Blood Index [Robot Wealth]
This post builds on work done by jcl over at his blog, The Financial Hacker. He proposes the Cold Blood Index as a means of objectively deciding whether to continue trading a system through a drawdown. I was recently looking for a solution like this and actually settled on a modification of jcl’s
- 9 years ago, 1 Nov 2015, 11:57am -
Extreme Divergence: Negative Equity Returns Ahead [Trader Edge]
Many traders use technical and/or fundamental data, but few traders have discovered the unique benefits of using sentiment data in their investment process. Sentiment data attempts to quantify the emotional mood of investors and traders and can be used as a very effective contra-indicator. When
- 9 years ago, 1 Nov 2015, 11:48am -
10 Reasons to Use Elixir in Finance [John Orford]
Elixir is the new hot programming language on the block. The bastard child of Ruby and Erlang. Syntax Ruby is designed like Apple designs phones. It looks and feels right. I love that the goal of Ruby language design is to reduce cognitive dissonance when implementing features. Everything has to fit
- 9 years ago, 1 Nov 2015, 11:47am -