Quant Mashup Daily Academic Alpha: Facts and Fantasies in Commodities [Alpha Architect]Facts and Fantasies About Commodity Futures Ten Years Later Gorton and Rouwenhorst (2006) examined commodity futures returns over the period July 1959 to December 2004 based on an equally-weighted index. They found that fully collateralized commodity futures had historically offered the same return(...) Some Impressions from R Finance 2015 [Revolutions]The R/Finance 2015 Conference wrapped up last Saturday at UIC. It has been seven years already, but R/Finance still has the magic! - mostly very high quality presentations and the opportunity to interact and talk shop with some of the most accomplished R developers, financial modelers and even a few(...) How to Put the Fizz Back in Coke (Part 3) [Jay On The Markets]An Actual (Theoretical) Approach to Trading KO So let’s assume two traders took the following approaches to trading KO starting on 12/31/1981, each with $1,000: *Trader A bought $1,000 worth of KO stock and held it through 6/2/2015. *Trader B bought and held KO stock twice a year, during the two(...) Global breadth weakening $SPY [@NautilusCap]Global breadth weakening $SPY [Academic Paper] Superstatistical Fluctuations in Time Series of Leverage Returns [@Quantivity]Superstatistical Fluctuations in Time Series of Leverage Returns [Academic Paper] Generalized Statistical Mechanics for Superstatistical Systems [@Quantivity]Generalized Statistical Mechanics for Superstatistical Systems [Academic Paper] From Time Series to Superstatistics [@Quantivity]From Time Series to Superstatistics [Academic Paper] Transition from Lognormal to Chi-square Superstatistics for Financial Time Series [@Quantivity]Transition from Lognormal to Chi-square Superstatistics for Financial Time Series Review of Momentum and Markowitz A Golden Combination paper [Systematic Investor]To install Systematic Investor Toolbox (SIT) please visit About page. The Momentum and Markowitz: A Golden Combination (2015) by Keller, Butler, Kipnis paper is a review of practitioner’s tools to make mean variance optimization portfolio a viable solution. In particular, authors suggest and test:(...) Realised Steady Vol [John Orford]The Steady Vol strategy tries to keep your portfolio's returns stable while slowly accruing returns over the long term. To that end I used the Vix to predict vol over the next month in order to adjust exposure up or down and stabilise short term returns. Turns out realised vol based on the(...) Forex Trading Diary #6 - Multi-Day Trading and Plotting Results [Quant Start]It's been a while since my latest Forex Trading Diary update. I've been busy working on the new QuantStart Jobs Board and so I've not had as much time as usual to work on QSForex, although I have made some progress! In particular I have been able to add some new features including:(...) An Improved High Yield Alternative [EconomPic]I really don't like the high yield asset class. Not just in the current environment with near-low historical yields and the potential for material liquidity issues, but in general. As an asset class, I think the high yield asset class: Often caters to unsophisticated investors that only look at(...) Long-term uptrend in yields? $TLT [@NautilusCap]Long-term uptrend in yields? $TLT RUT Iron Condor - High Loss Threshold - 38 DTE [DTR Trading]This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 38 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester. For background on the setup for the backtests, as well as the(...) How SPX Has Moved After Similar Drops & Consolidations [Quantifiable Edges]After the big down day last Tuesday the market has not done a lot. In fact, it has closed within the true range of that 1 bar every day for the last week. The bears failed to follow through on that selloff, but the bulls have not managed to move the SPX back out of the range either. This triggered(...) Are Stocks Due For A Big Move? [Dana Lyons]With last month’s failed (so far) breakout in the U.S. equity market, stocks are relegated once again to range-bound status. Essentially the market has gone nowhere since the beginning of the year and, by some measures, 2015 has been the quietest start to a year in over a century. One(...) [Academic Paper] Level, Slope and Curve Factor Model for Stocks [@Quantivity]Level, Slope and Curve Factor Model for Stocks Dual Momentum for non-US Investors [Dual Momentum]Gogi Grewal is an engineer and astute financial analyst who has been following my work for a number of years. He has an excellent grasp of dual momentum. Since Gogi lives in Canada, he decided to research the best way for non-US investors to utilize dual momentum. Gogi has generously offered to(...) Did Ben Graham Value Investing Work in the Recent Bull Market? [Alpha Architect]Forbes outlines one of Ben Graham’s basic value investment strategies and analyzes how it has performed from 1949 through 2012. Even with all of the fiscal cliff and European debt drama in 2012, the Graham-based portfolio has had a particularly good year. While the S&P 500 has notched a solid(...) Price Momentum Model | Trading Strategy (Benchmark) [Oxford Capital]I. Trading Strategy Concept: Trend-following trading strategy based on a simple price momentum. Source: Kaufman, P. J. (2013). Trading Systems and Methods. New Jersey: John Wiley & Sons, Inc. Research Goal: Performance verification of the price momentum model. Specification: Table 1. Results:(...) State of Trend Following in May [Au Tra Sy]Another successive down month for the index. Enough to take it into negative territory for the year. Please check below for more details. Detailed Results The figures for the month are: May return: -2.38% YTD return: -2.62% Below is the chart displaying individual system results throughout May:(...) Harvesting the Size Factor Premium [Flirting with Models]We recently published an article on S&P's Indexology blog that looks at some of the more practical aspects of harvesting the size premium - a premium earned by owning smaller stocks. In our U.S. Factor Defensive Equity strategy, we hold ETFs that aim to capture premiums from value, size,(...) Wisdom State of Trend Following - May 2015 [Wisdom Trading]May 2015: Trend Following DOWN -2.67% — YTD: +4.99% The downward consolidation continues in May with a negative month. The index still stays positive Year-To-Date. Below is the full State of Trend Following report as of last month. Performance is hypothetical. Chart for May: Wisdom State of Trend(...) Metals stocks poised to bounce back $XME [@NautilusCap]Metals stocks poised to bounce back $XME Testing the NASDAQ/S&P500 Relative Strength Ratio [Better System Trader]In Episode 7 of the BetterSystemTrader podcast Rob Hanna from Quantifiable Edges discusses a market behaviour where the strength of the NASDAQ often leads strength in other markets. Here is what Rob had to say: Well one indicator I like to use that I have shown on the blog years ago and it is part(...) Weekly Commentary - Volatility Through a Different Lens [Flirting with Models]We would venture that there is a strong correlation between the amount of ink spilled about an asset class or sector and its volatility. So given that the energy sector fell nearly 5.5% in the last month without much interest is somewhat curious. Or, is it? First, let's establish whether our(...) Additional interesting paper related to several momentum strategies [Quantpedia]#8 - FX Momentum #14 - Momentum Effect in Stocks #21 - Momentum Effect in Commodities #118 - Time Series Momentum Effect Authors: Goyal, Jagadeesh Title: Cross-Sectional and Time-Series Tests of Return Predictability: What Is the Difference? Link:(...) Financial Imprecision [John Orford]I only started drinking coffee when I started working crazy hours. Not to keep awake but as an excuse to pop out of the office for a few minutes and suck in some fresh air. Either coffee or cigarettes, thank goodness not the latter. In any case, I recently read about a guy who is reverse engineering(...) S&P500 All time high [Stockdotnu]he graph shows the all-time high on the S&P500, since year 1957 to 2015, and the line is moving and in close-up one can see how long each ATH has been going on. However, this is a smaller picture of the graph and the real is very big and I will not put it out due to the size. Longest ATH in a(...) SPX Iron Condor - High Loss Threshold Results Summary [DTR Trading]Over the last four blog posts we looked at eight different exit approaches for a standard SPX iron condor with 25 point wings. These exits included: STD - NA%:NA% - exit at 8 DTE. STD - NA%:50% - exit if the trade has a profit of 50% of its initial credit OR 8 DTE. STD - 100%:50% - exit if the trade(...) Ignore the Margin Debt Alarm [EconomPic]Ignore the Margin Debt Alarm The margin debt alarm has seemingly been sounded every few months when investors realize absolute levels of margin debt has reached new all-time highs (inferring that risk taking has too reached all-time high levels and stocks are at risk). This brief post highlights why(...) Investors Pay Premiums For Bad Bets [Larry Swedroe]The first formal asset pricing model—the capital asset pricing model—was built on certain assumptions, including that investors are risk-averse; will maximize the expected utility of absolute wealth; and care only about the mean and variance of return. However, academic research has found that(...) Interview with Gary Antonacci [Better System Trader]Gary Antonacci has over 35 years experience as an investment professional focusing on underexploited investment opportunities. His award-winning research on momentum investing combines relative strength price momentum with trend following absolute momentum. He is recognized as a foremost authority(...) Chapter 6 – The Global Market Portfolio [Meb Faber]This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and I’ll send you a free copy. —- “We have a passion for keeping things simple.” – Charlie Munger, Vice-Chairman Berkshire Hathaway Why not just invest along(...) Dual Momentum Investigation [John Orford]In science. Proper science. Scientists are told to report the investigations that lead nowhere. Why is this important? One. So people don't unknowingly waste time down the same dead and can learn from the experience of others. Two. When you count the dead ends, sometimes statistical tests(...) Ivy Portfolio June 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 long-term(...) Chapter 5 – The Permanent Portfolio [Meb Faber]This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and I’ll send you a free copy. —- Harry Browne was an author of over 12 books, a one-time Presidential candidate, and a financial advisor. The basic portfolio that(...) What Do Falling Corporate Profits Mean With Stocks Near Their Highs? [Dana Lyons]If you’ve followed this blog for awhile, you may have noticed that we don’t cover fundamental or economic data too often. That is for a good reason: we don’t use it, at all. Occasionally, however, a data point will cross the radar that piques our interest for whatever reason. So it is with the(...) Discussing Deep Value and the Acquirer’s Multiple at Harvard [Greenbackd]A little over a month ago I travelled to Harvard to speak to Michael Parzen’s business statistics class on Deep Value and the acquirer’s multiple. Here is the recording of that talk. You can get a free list of the best deep value stocks in the largest 1000 names on The Acquirer’s Multiple. Buy(...) Equally Weighted Portfolios [John Orford]Old school German and Austrian professors operate on 'academic time'. When you are told to meet at 3, they really mean a quarter past. You wouldn't want to reverse the tables though. Better to be a quarter of an hour too early than too late. I never got the hang of academic time. Same(...) Chapter 4 - The Risk Parity and All Seasons Portfolios [Meb Faber]This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and I'll send you a free copy. -- "I know that there are good and bad environments for all asset classes. And I know that in one's lifetime, there will(...) List of Funds or Trading Firms Using Artificial Intelligence or Machine Learning [Robust Tech House]The following are the list of funds or trading firms using artificial intelligence or machine learning for their research and trading purposes. There are probably a lot more than this but many prefer to stay very quiet. The list and info here is compiled from public sources amongst the links(...) Financial Real Time Data in Client Side Javascript [John Orford]Few people that work in the financial world actually live in the now. Some live at the last month end; others at 't-1'. Only silicon, mad men and chattering Tweeters live on the edge. Following on from the Flow and Statelessness post, I used Lazy.js, a CORS proxy and the Markit On Demand(...) [Academic Paper] Test of Covariance Matrix Forecasting Methods [@Quantivity]Test of Covariance Matrix Forecasting Methods Basic Factor Analysis: Simple Tools to Understand What Drives Performance [Alpha Architect]Investors should know what they are buying and why they are buying it. Unfortunately, more often than not, investment products are jammed down the throats of unsuspecting victims who are either ignorant, easy to influence, and/or don’t really care. We highlighted an extreme example of this in the(...) Momentum Environments [Systematic Relative Strength]How consistent are Momentum returns? This is among the most frequently asked questions about Momentum (and about any investment strategy for that matter). One way to answer this question is to look at the following table from a white paper published by RBC Capital Markets. According to their(...) SPX Iron Condor - High Loss Threshold - 80 DTE [DTR Trading]This post looks at a standard (STD) one-lot iron condor on the S&P 500 Index (SPX), initiated at 80 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester. For background on the setup for the backtests, as well as the(...) Amazing paper related to several momentum strategies [Quantpedia]#2 - Asset Class Momentum - Rotational System #3 - Sector Momentum - Rotational System #8 - FX Momentum #14 - Momentum Effect in Stocks #15 - Momentum Effect in Country Equity Indexes Authors: Geczy, Samonov Title: 215 Years of Global Multi-Asset Momentum: 1800-2014 (Equities, Sectors, Currencies,(...) [Academic Paper] Multivariate Conditional Outlier Detection [@Quantivity]Multivariate Conditional Outlier Detection [Academic Paper] Feature Selection Risk [@Quantivity]Feature Selection Risk