Quant Mashup

Tops Wobble Before Falling Over [Quantifiable Edges]

I’ve shown numerous studies in the past that suggest uptrends often become choppy before they ultimately end. It is highly unusual for an uptrend that is showing strong persistence to abruptly top out. The study below demonstrates this concept. The persistent uptrend of late has kept SPX above its

- 3 weeks ago, 2 May 2019, 01:03pm -

Deep Dive into the Value Factor [Alpha Architect]

The financial equivalent of the famous Miller Lite, “tastes great, less filling” debate is the debate between traditional financial economics which uses risk theories to explain asset pricing and the newer behavioral finance field that uses human behavior to provide the explanations.

- 3 weeks ago, 2 May 2019, 01:03pm -

Tactical Asset Allocation in April [Allocate Smartly]

This is a summary of the recent performance of a wide range of excellent Tactical Asset Allocation (TAA) strategies, net of transaction costs. These strategies are sourced from books, academic papers, and other publications. While we don’t (yet) include every published TAA model, these strategies

- 3 weeks ago, 1 May 2019, 11:21pm -

Convexity Explains the High BitMEX ETH Funding Rate [Falkenblog]

BitMEX offers swaps that make it easy to lever a long or short bitcoin (BTC) and ether (ETH). The main reason it trades so much is that they are based outside of US or EU control in the little archipelago-nation of Seychelles, and also that it transacts only in Bitcoin. This combination makes it

- 3 weeks ago, 1 May 2019, 11:20pm -

Modified Hikkake Pattern | Trading Strategy (Filter & Exit) [Oxford Capital]

Developer: Dan Chesler, CTM, CTA. Concept: Trading strategy based on false breakouts. Research Goal: Performance verification. Specification: Table 1. Results: Figure 1-2. Trade Setup: Long Trades: The modified bullish hikkake pattern (a.k.a. the bullish “inside day false breakout”) consists of

- 3 weeks ago, 1 May 2019, 11:20pm -

Compound Your Knowledge Episode 10: Factor Investing & Hedge Fund Performance [Alpha Architect]

In this week’s video, we discuss three posts. The first post discusses the new index analysis section on our site. The second post, written by Tommi, uses Hedge Funds’ past performance to identify if one can predict future Hedge Fund performance. The last post discusses Wes’ video examining an

- 3 weeks ago, 1 May 2019, 11:19pm -

Momentum Is Dead! Long Live Momentum! [Robot Wealth]

In our inaugural Algo Bootcamp, we teamed up with our super-active community of traders and developed a long-only, always-in-the-market strategy for harvesting risk premia. It holds a number of different ETFs, varying their relative weighting on a monthly basis. We’re happy with it. However, the

- 3 weeks ago, 29 Apr 2019, 10:47am -

Asset Allocation Roundup [Allocate Smartly]

Four recent asset allocation articles (tactical or otherwise) that you might have missed: 1. Bond ETFs in an Era of Rising Rates (Better Buy & Hold) This is our first post from our new platform BetterBuyAndHold.com. Bonds face stiff headwinds in the coming years, and many will underperform what

- 3 weeks ago, 29 Apr 2019, 10:47am -

Style Surfing the Business Cycle [Flirting with Models]

In this commentary, we ask whether we should consider rotating factor exposure based upon the business cycle. To eliminate a source of model risk, we assume perfect knowledge of future recessions, allowing us to focus only on whether prevailing wisdom about which factors work during certain economic

- 3 weeks ago, 29 Apr 2019, 10:47am -

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

- 3 weeks ago, 29 Apr 2019, 10:47am -

12 Books on Factor Investing by Asset Managers [Two Centuries Investments]

Quantitative Portfolio Management by Edward Qian, Ronald Hua, Eric Sorensen Expected Returns by Antti Ilmanen Quantitative Value by Wesley Gray and Tobias Carlisle Quantitative Momentum by Wesley Gray and Jack Vogel Dual Momentum Investing by Gary Antonacci Little Book that Still Beats the Market by

- 3 weeks ago, 29 Apr 2019, 10:46am -

Equity Factors & The Mighty US Dollar [Factor Research]

The US dollar had a slightly negative relationship with the stock market since 1996 Some equity factors are more sensitive to changes in the US dollar than others On average the sensitivity is zero, but as often averages are misleading INTRODUCTION The Economist’s Big Mac Index measures if

- 3 weeks ago, 29 Apr 2019, 10:46am -

The implicit subsidies behind simple trading rules [SR SV]

Implicit subsidies are premia paid by large financial markets participants for reasons other than risk-return optimization (view post here). Their estimation requires skill and a strong “quantamental system”. However, implicit subsidies are behind the popularity and temporary success of many

- 3 weeks ago, 29 Apr 2019, 10:46am -

Building a Robinhood Stock Trading Bot (h/t @PyQuantNews) [Kevin Guo]

This is probably my favorite side project I’ve done. I’ve always been interested in algorithmic trading, and it’s exciting to code something that can potentially repay you in the form of cold, hard cash. The bot is written in Python and relies on two core libraries for the majority of its

- 4 weeks ago, 26 Apr 2019, 03:14pm -

When to ‘Buy the Dip’ (h/t @PyQuantNews) [Osho Jha]

Motivation: “Buy the dip” — it’s a frustratingly simple piece of advice. Like most pieces of advice, it’s easier said than done and the giver of such advice has probably not attempted to practice what they preach. It induces FOMO, which leads to the “hope trade”, when the “hope

- 4 weeks ago, 26 Apr 2019, 03:13pm -

Buyer Beware: The Reality of Tax-Loss Harvesting Benefits [Alpha Architect]

Tax loss harvesting is widely promoted, but we think the benefits are generally misunderstood and often overstated.(1) • The benefits of loss harvesting arise from tax deferral, similar to the benefits of saving in a retirement account. • The benefits of tax deferral rise and fall with expected

- 4 weeks ago, 26 Apr 2019, 03:10pm -

Is News Sentiment Still Adding Alpha? [EP Chan]

Nowadays it is nearly impossible to step into a quant trading conference without being bombarded with flyers from data vendors and panel discussions on news sentiment. Our team at QTS has made a vigorous effort in the past trying to extract value from such data, with indifferent results. But the

- 4 weeks ago, 26 Apr 2019, 05:59am -

Avoiding Trades Before Earnings [Alvarez Quant Trading]

Over my last 16 years of research, one of the most asked questions is should you not take trades before an earnings release. I could never answer this question because I did not have the data. I can easily recall trades were a stock came out with poor earnings and crashed 25%. But without testing

- 1 month ago, 24 Apr 2019, 11:17am -

Meta-Labeling (A Toy Example) [Quants Portal]

Welcome to the concept of Meta-Labeling. This blog post investigates the idea and tries to help build an intuition for what is taking place. The idea of meta-labeling is first mentioned in the textbook Advances in Financial Machine Learning by Marcos Lopez de Prado and promises to improve model and

- 1 month ago, 24 Apr 2019, 10:41am -

P-hacking and backtest overfitting [Mathematical Investor]

Recent public reports have underscored a crisis of reproducibility in numerous fields of science. Here are just a few of recent cases that have attracted widespread publicity: In 2012, Amgen researchers reported that they were able to reproduce fewer than 10 of 53 cancer studies. In 2013, in the

- 1 month ago, 24 Apr 2019, 10:41am -

Podcast: Gary Antonacci: combining relative strength price momentum with absolute momentum [System Trader Show]

Imagine that you spend a few minutes a month to manage your investment. All is rule-based, statistically significant, simple and logical. No place for discretionary decisions, no guessing, no gut feeling, no forecasting. And in the long-term, you are almost sure to beat all the actively managed

- 1 month ago, 24 Apr 2019, 10:40am -

Replicating Famous Hedge Funds [Factor Research]

Diverse hedge fund strategies can be replicated via factor-mimicking portfolios The analysis highlights that most returns are explained by factors, not alpha However, hedge funds can create value by harvesting factor returns efficiently via portfolio construction INTRODUCTION In 1973, the U.S. Food

- 1 month ago, 23 Apr 2019, 10:24am -

The Recent $RUT / $SPX Divergence And Why It Might Be Bullish [Quantifiable Edges]

One aspect of recent market action that is interesting is the weakness in the Russell vs the SPX over the last few days. While some may worry the divergence is concerning, an old Quantifinder study that appeared last night indicates the setup is likely suggestive of an upside edge. It looked at

- 1 month ago, 23 Apr 2019, 10:23am -

Bond ETFs in an Era of Rising Rates [Better Buy And Hold]

Bonds are key to a well-diversified portfolio; they’ve provided both consistent returns and consistent diversification against riskier asset classes like stocks and real estate. But bonds face stiff headwinds in the coming years. That’s not prognostication, it’s a mathematical certainty.

- 1 month ago, 22 Apr 2019, 10:45am -

mlfinlab on PyPi Index [Quants Portal]

mlfinlab is a “living and breathing” project in the sense that it is continually enhanced with new code from the chapters in the Advanced Financial Machine Learning book. We have built this on lean principles with the goal of providing the greatest value to the quantitative community. Currently

- 1 month ago, 22 Apr 2019, 10:44am -

The Path-Dependent Nature of Perfect Withdrawal Rates [Flirting with Models]

The Perfect Withdrawal Rate (PWR) is the rate of regular portfolio withdrawals that leads to a zero balance over a given time frame. 4% is the commonly accepted lower bound for safe withdrawal rates, but this is only based on one realization of history and the actual risk investors take on by using

- 1 month ago, 22 Apr 2019, 10:43am -

12 Quant Business Practices to Improve [Two Centuries Investments]

Only showing the latest backtest versions without disclosing their out-of-sample degradation Backtesting today’s static holdings (managers, asset allocations, sub-asset-classes) into the past - filled with look-ahead bias Charging fees that are on par with the tracking error of the strategy Asking

- 1 month ago, 22 Apr 2019, 10:43am -

Compound Your Knowledge Episode 9: Investor Confidence & Issues with Factor Investing [Alpha Architect]

In this week’s post, we discuss two posts. The first post, written by Elisabetta, examines a new method attempting to directly measure aggregate investor overconfidence. The second post, written by Larry Swedroe, examines issues that plague Factor Investing.

- 1 month ago, 22 Apr 2019, 10:43am -

Multi-threading Trading Strategy Back-tests and Monte Carlo Simulations in Python [Python For Finance]

In this post I will be looking at a few things all combined into one script – you ‘ll see what I mean in a moment… Being a blog about Python for finance, and having an admitted leaning towards scripting, backtesting and optimising systematic strategies I thought I would look at all three at

- 1 month ago, 19 Apr 2019, 03:54pm -

Factor Investing is Simple, But Not Easy (Video) [Alpha Architect]

We are creating a series of long-form educational videos that present materials often covered in our white papers. The intent of these videos is make our content more accessible to visual learners. The video below is a presentation related to a long-form post we have on a post called, “The

- 1 month ago, 19 Apr 2019, 03:54pm -

Daily Extremes - Significance of time [Philipp Kahler]

Analysing at which time daily market extremes are established shows the significance of the first and last hours of market action. See how different markets show different behaviour and see what can be learned from this analysis. Probability of Extremes A day of trading usually starts with a lot of

- 1 month ago, 18 Apr 2019, 10:48am -

Gini Index For Decision Trees [Quant Insti]

Decision trees are often used while implementing machine learning algorithms. The hierarchical structure of a decision tree leads us to the final outcome by traversing through the nodes of the tree. Each node consists of an attribute or feature which is further split into more nodes as we move down

- 1 month ago, 18 Apr 2019, 10:48am -

SPX Strangle - 2018 Review [DTR Trading]

I've been a little curious how the SPX strangle has been performing since I last analyzed it's results back in 2015. For this article, we'll just look at the following variations and how they performed from January 2007 through December 2018: 59 DTE - 16 Delta Short Strikes (100:50) /

- 1 month ago, 18 Apr 2019, 10:48am -

Reliably download historical market data from Yahoo! Finance with Python [Ran Aroussi]

Ever since Yahoo! Finance decommissioned their historical data API, Python developers looked for a reliable workaround. As a result, my library, fix-yahoo-finance, gained momentum and was downloaded over 100,000 acording to PyPi. fix-yahoo-finance aimed to offer a temporary fix to the problem by

- 1 month ago, 17 Apr 2019, 10:23am -

Trading and investing performance - year five [Investment Idiocy]

Hard to believe, but it has been five and a half years since I had to go to an office to manage other peoples money, and exactly five years since I began systematically trading my own. Time then for another annual review. Perhaps it is confusing for overseas readers, but these reviews follow the UK

- 1 month ago, 17 Apr 2019, 10:23am -

Classification of Market Regimes [Quant Dare]

Understanding classification of market regimes is fairly important in finance. It all comes down to correctly predicting the way prices are going to move. But prediction isn’t the only crucial thing; knowing how to describe what has already happened is also of great importance. In this QuantDare

- 1 month ago, 17 Apr 2019, 10:22am -

The Factors that Plague Factor Investing [Alpha Architect]

For those interested in the literature on factor-based investing, a new paper by Robert Arnott, Campbell Harvey, Vitali Kalesnik and Juhani Linnainmaa, “Alice’s Adventures in Factorland: Three Blunders That Plague Factor Investing,” focuses on why, in some ways, it has failed to live up to its

- 1 month ago, 16 Apr 2019, 09:45pm -

The seven reasons most econometric investments fail [Mathematical Investor]

Marcos Lopez de Prado, recently named 2019 Quant of the Year by the Journal of Portfolio Management, has released a presentation entitled The seven reasons most econometric investments fail. Lopez de Prado’s overall point is that many widely used econometric approaches in finance either rely on

- 1 month ago, 16 Apr 2019, 09:45pm -

Warren Buffet: The Greatest Factor Investor of All Time? [Factor Research]

A factor exposure of Berkshire Hathaway reveals structural factor tilts Long Value, Size, Quality, and Low Volatility factors and short Growth and Dividend Yield Warren Buffet generated little alpha, but is highly skilled at harvesting factor returns SAINTS AND STAR INVESTORS The Vatican waits at

- 1 month ago, 16 Apr 2019, 09:45pm -

Aggregate Investor Confidence in the Stock Market [Alpha Architect]

What are the Research Questions? A common assumption in finance theory is that agents in the stock market behave rationally. Even if temporary mispricing occurs, due to irrational beliefs or incomplete information of some agents, arbitrageurs swiftly restore equilibria. In contrast, the history of

- 1 month ago, 16 Apr 2019, 09:44pm -

The Speed Limit of Trend [Flirting with Models]

Trend following is “mechanically convex,” meaning that the convexity profile it generates is driven by the rules that govern the strategy. While the convexity can be measured analytically, the unknown nature of future price dynamics makes it difficult to say anything specific about expected

- 1 month ago, 15 Apr 2019, 09:56am -

Investment Strategy in an Uncertain World [Alpha Architect]

In 1921, University of Chicago Professor Frank Knight wrote the classic book “Risk, Uncertainty, and Profit.” An article from the Library of Economics and Liberty described Knight’s definitions of risk and uncertainty as follows: Risk is present when future events occur with measurable

- 1 month ago, 11 Apr 2019, 01:05pm -

Coming Soon: Quant Minds International - May 13-17 - Vienna, Austria

QuantMinds International heads to Vienna on 13-17 May! Now in it’s 26th year, QuantMinds International brings together 400+ global quant finance experts from banks, buy-side, academia and beyond, to cover every hot topic in quant finance over the course of 5 days. Quote VIP code FKN2595QCYMU for a

- 1 month ago, 10 Apr 2019, 01:50pm -

Learning to Rank with TensorFlow [Quant Dare]

Alphabet, the largest Internet-based company, has based its success on sophisticated information retrieval algorithms since its origins. Now, 20 years later, one of its divisions is open-sourcing part of its secret sauce, drawing attention from developers all over the world. Since Google was founded

- 1 month ago, 10 Apr 2019, 01:48pm -

The Problem With Unfilled Gaps Down From Intermediate-Term Highs [Quantifiable Edges]

I saw some bullish studies emerge last night. But there was a study below that was not favorable that I thought readers would find interesting. One potential issue with Tuesday’s decline is that it included an unfilled gap down. Generally, an unfilled gap down from a high has more trouble quickly

- 1 month ago, 10 Apr 2019, 01:48pm -

Tail risk of systematic investment strategies and risk-premia alpha [Artur Sepp]

Everyone knows that the risk profile of systematic strategies can change considerably when equity markets turn down and volatilities spike. For an example, a smooth profile of a short volatility delta-hedged strategy in normal regimes becomes highly volatile and correlated to equity markets in

- 1 month ago, 9 Apr 2019, 02:22pm -

S&P500 - when to be invested [Philipp Kahler]

S&P500 – when to be invested The stock market shows some astonishingly stable date based patterns. Using a performance heat map of the S&P500 index, these patterns are easily found. Date based performance The chart below shows the profit factor of a long only strategy investing in the

- 1 month ago, 9 Apr 2019, 02:18pm -

A Remarkable New Factor: The Cash Conversion Cycle [Alpha Architect]

The barrier to entry into the factor zoo has increased exponentially. Prof. Harvey (now working with RAFI) made this clear at the 2017 AFA address, when he highlighted the issue with data-mining in front of a room full of academics from top-flight research programs in the country. Prof. Harvey and

- 1 month ago, 9 Apr 2019, 12:32pm -

Equity Factor Census [CXO Advisory]

Should investors trust academic equity factor research? In their February 2019 paper entitled “A Census of the Factor Zoo”, Campbell Harvey and Yan Liu announce a comprehensive database of hundreds of equity factors from top academic journals and working papers through January 2019, including a

- 1 month ago, 9 Apr 2019, 12:32pm -

The First Risk and Opportunity in Active Investing [Two Centuries Investments]

What is the most significant risk in quant (and all active) investing today? The First Moment (the mean) The Second Moment (under-estimating tracking error) The Third Moment (skewness, left tails, crash risk) Mis-specified risk model (hidden factor biases, factors ‘eating’ alphas) Sub-optimal

- 1 month ago, 8 Apr 2019, 11:10pm -

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