Quant Mashup
From Fragility to Robustness: The Value of Ensembles [Invest Resolve]
Google dictionary defines the word robust thusly: sturdy in construction able to withstand or overcome adverse conditions … and offers the following definitions for the word fragile: easily broken or damaged flimsy or insubstantial; easily destroyed not strong or sturdy; delicate and vulnerable
- 4 weeks ago, 28 Dec 2019, 12:22am -
Quant Investing: Greenblatt Value Strategy [Investing For A Living]
In this post I take a look a popular and quite simple quant strategy that combines value and profitability, the Greenblatt Value Strategy. Results are impressive and the strategy has held up better than most value strategies over the last 10 years. And even more impressive it has even outperformed
- 4 weeks ago, 28 Dec 2019, 12:22am -
International Evidence on Factor Premiums [Alpha Architect]
Klaus Grobys contributes to the literature on asset pricing models with his October 2019 paper, “Another Look on Choosing Factors: The International Evidence.” Using bootstrap simulations, Grobys examined international markets, specifically the four regions of North America (NA), Europe, Japan
- 4 weeks ago, 28 Dec 2019, 12:22am -
The market impact of rebalancing factor investing strategies [Alpha Architect]
Transaction costs are a major concern for practitioners attempting to implement factors investing strategies identified in academic literature. Naturally, this is a subject that has been covered before here, here, and here, but a new look at transaction costs never hurts. The authors of this paper
- 1 month ago, 25 Dec 2019, 02:35pm -
The Best Investment Writing Volume 3: Wes Gray (@AlphaArchitect) [Meb Faber]
Author: Wes Gray. Wes is the CEO/CIO of Alpha Architect. He has published multiple academic papers and four books, including Quantitative Value (Wiley, 2012), DIY Financial Advisor (Wiley, 2015), and Quantitative Momentum (Wiley, 2016). After serving as a Captain in the United States Marine Corps,
- 1 month ago, 25 Dec 2019, 02:34pm -
Timing Trend Model Specification with Momentum [Flirting with Models]
Over the last several years, we have written several research notes demonstrating the potential benefits of diversifying “specification risk.” Specification risk occurs when an investment strategy is overly sensitive to the outcome of a single investment process or parameter choice. Adopting an
- 1 month ago, 23 Dec 2019, 12:51pm -
Gregory Zuckerman: The Man Who Solved the Man Who Solved the Market [Invest Resolve]
For the quant community, it was arguably the most awaited book of 2019. Finally a peek behind the curtains into the most successful hedge fund manager in history. The +66% average (gross) returns that Jim Simons and his army of data scientists produced over the last 17 years in their Medallion fund
- 1 month ago, 23 Dec 2019, 12:50pm -
Research Compendium 2019 [Factor Research]
In 2019 we published more than 50 research notes on mostly factor investing and smart beta ETFs, but also on topics like ESG, activist investors, hedge fund replication, and artificial intelligence. The Research Compendium 2019 contains all of our research published this year. We would like to thank
- 1 month ago, 23 Dec 2019, 12:49pm -
Quant Investing: Volatility Curve Model [Investing For A Living]
This post introduces a quant trading model based on volatility. More specifically it uses the prices of volatility futures contracts based on the SP500 to make risk-on and risk-off decisions that can be used to trade various risk-assets. Why Volatility? There is a bunch of research that shows that
- 1 month ago, 22 Dec 2019, 04:14pm -
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.
- 1 month ago, 22 Dec 2019, 04:14pm -
Research Review | 20 December 2019 | Value Investing [Capital Spectator]
Value Bubbles Messaoud Chibane and Samuel Ouzan (Neoma Business School) February 27, 2019 According to several extended behavioral theories, value profits should mirror momentum profits, and vary over time. We test these theories in the cross section of returns. Value returns depend on market
- 1 month ago, 22 Dec 2019, 04:13pm -
How To Trade Distressed Stocks Using Free APIs [Harry Sauers]
The Current Ratio is a vital metric for understanding a company’s liquidity position as well as its ability to pay its obligations on time. It is defined simply as the company’s total current assets divided by its current liabilities. Current assets are defined as assets that are cash or
- 1 month ago, 20 Dec 2019, 03:41am -
Over a billion dollars in a single day with Rob Carver (@InvestingIdiocy) [System Trader Show]
Robert Carver worked in the City of London for over a decade. For seven years he was a portfolio manager at AHL — one of the world’s largest systematic hedge funds — before, during and after the global financial meltdown of 2008. In this interview, we talk about many trading topics, mostly
- 1 month ago, 20 Dec 2019, 03:40am -
Converting LOBSTER demo R code into Python [R Trader]
It has been more than a year since my last post, I’ve been super busy with consulting assignments working on algorithmic/electronic trading. The workload is still heavy but I managed to find a few hours to write this post as I came across a new great tool: LOBSTER (and before anyone asks I’ve no
- 1 month ago, 18 Dec 2019, 10:30am -
Protecting the Downside of Trend When It Is Not Your Friend: Part 2/2 [Alpha Architect]
In Part 1 of this article, we reviewed the performance of using a more complex form of simple trend following (i.e. adding a channel breakout rule alongside a simple time-series momentum rule). The simple trend signal (S) used was based on the sign of the trailing 12-month return of the asset. The
- 1 month ago, 18 Dec 2019, 07:20am -
An Analysis of “Testing Benjamin Graham’s Net Current Asset Value Strategy in London” [Alpha Architect]
This is our third post in our series on “net-nets” having previously analyzed “Benjamin Graham’s Net Current Asset Values: A Performance Update” by Henry R. Oppenheimer and “Graham’s Net-Nets: Outdated or Outstanding?” by James Montier. The focus of this post is the research paper
- 1 month ago, 18 Dec 2019, 07:19am -
Re-specifying the Fama French 3-Factor Model [Flirting with Models]
The Fama French three-factor model provides a powerful tool for assessing exposures to equity risk premia in investment strategies. In this note, we explore alternative specifications of the value (HML) and size (SMB) factors using price-to-earnings, price-to-cash flow, and dividend yield. Running
- 1 month ago, 16 Dec 2019, 09:47am -
Global Pension Funds: The Coming Storm [Factor Research]
The outlook for US equity and bond returns is low based on historical data The return assumptions of US public pension funds are difficult to achieve Only an extreme allocation to alternatives would meet the expected rate of return THE GLOBAL PENSION FUND CRISIS Tens of thousands of Dutch workers
- 1 month ago, 16 Dec 2019, 09:46am -
The Most Wonderful Week of the Year…Until Last Year [Quantifiable Edges]
I have written many times over the years about the bullish tendency of the market during opex week in December. I’ve even referred to it as “The Most Wonderful Week of the Year”. And it was…up until last year. So below is an updated look at the stats and profit curve for owning SPX from the
- 1 month ago, 16 Dec 2019, 09:46am -
A Tale of an Edgy Panda and some Python Reviews [QuantStrat TradeR]
This post will be a quickie detailing a rather annoying…finding about the pandas package in Python. For those not in the know, I’ve been taking some Python courses, trying to port my R finance skills into Python, because R seems to have fallen out of favor in the world of finance. (If you know
- 1 month ago, 15 Dec 2019, 07:58pm -
Rebalancing and market price distortions [SR SV]
Price distortions are an important source of short-term trading profits, particularly in turbulent markets. Here price distortions mean apparent price-value gaps that arise from large inefficient flows. An inefficient flow is a transaction that is not motivated by rational risk-return optimization.
- 1 month ago, 15 Dec 2019, 07:57pm -
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
- 1 month ago, 13 Dec 2019, 08:22am -
Trend-Following Plus Momentum in ETFs [Alvarez Quant Trading]
In a previous post, Trend-following vs. Momentum in ETFs, I compared trend-following and momentum to see which produced better results on a basket of ETFs. In the post, I mentioned combining trend-following and momentum into one strategy to see if combined they can beat buy and hold more often.
- 1 month ago, 13 Dec 2019, 08:21am -
Improving the Performance of Deep Value Strategies [Alpha Architect]
A large body of evidence demonstrates that investment strategies focused on buying stocks that are cheap relative to measures of fundamental value have achieved higher long-term returns than the broad market. Motivated by such legendary investors as Benjamin Graham, David Dodd, and Walter Schloss,
- 1 month ago, 13 Dec 2019, 08:21am -
Dimensionality reduction method through autoencoders [Quant Dare]
We’ve already talked about dimensionality reduction long and hard in this blog, usually focusing on PCA. Besides, in my latest post I introduced another way to reduce dimensions based on autoencoders. However, in that time I focused on how to use autoencoders as predictor, while now I’d like to
- 1 month ago, 11 Dec 2019, 03:07am -
Historical Fed Day Performance By Chairperson [Quantifiable Edges]
I have written about Fed Day edges for years. Much of the research can be found in the Fed Study category blog posts. Today I decided to share a chart showing historical performance on Fed Days over the course of the last 5 Fed chairpeople. 2019-12-10 Have a happy Fed Day tomorrow!
- 1 month ago, 11 Dec 2019, 03:06am -
New and Improved Sharpe Ratio adjustment in the handcrafting method [Investment Idiocy]
In my recent posts on skew and kurtosis I've put together a large number of ideas for possible trading strategies. The next step will be to create and test these ideas out. However I already know from my initial analysis that many of these ideas will probably have poor performance. This leaves
- 1 month ago, 10 Dec 2019, 10:56am -
Monte Carlo Simulation: Definition, Example, Code [Quant Insti]
Years ago, I had made it to the final round in an interview for a Senior Delta One/Quantitative Futures position at an HFT firm (unnamed for privacy). Things were going well, I had answered two out of three of those ridiculous questions that are only applicable in Subsaharan Africa or Finance
- 1 month ago, 10 Dec 2019, 10:55am -
US nonfarm employment prediction using RIWI Corp alternative data [EP Chan]
The monthly US nonfarm payroll (NFP) announcement by the United States Bureau of Labor Statistics (BLS) is one of the most closely watched economic indicators, for economists and investors alike. (When I was teaching a class at a well-known proprietary trading firm, the traders suddenly ran out of
- 1 month ago, 9 Dec 2019, 03:59pm -
How to Evaluate Smart Beta ETFs [Factor Research]
Smart beta ETFs can be compared via a factor score, which relates fees to the factor exposure Value-focused ETFs in the US show a wide range of factor scores Large firms offer more attractive factor scores, but largely due to lower fees INTRODUCTION Beta is like ice cream and comes in many flavors.
- 1 month ago, 9 Dec 2019, 03:58pm -
A Conversation on Rebalance Timing Luck [Flirting with Models]
My guest today is … me. But rather than interview myself, my co-portfolio manager Nathan Faber joins the podcast to take the reigns. In this episode, we talk all things rebalance timing luck. It’s been an obsession of mine for years and something we believe to be a dramatically misunderstood and
- 1 month ago, 9 Dec 2019, 03:57pm -
Protecting the Downside of Trend When It Is Not Your Friend : Part 1 [Alpha Architect]
We’ve done a poor job hiding our interest in Trend Following (see Trend, Trend, Trend, is your friend. And swing over to Corey Hoffstein’s site for even more!). So this paper hits on a subject we know and love. The authors of this study (part 1) have one basic objective: determine if the
- 1 month ago, 9 Dec 2019, 03:56pm -
Lessons learned building ML trading system that turned $5k into $200k (h/t @PyQuantNews) [Tradient]
One of my recent side projects was building an automated trading system for the crypto markets. To be fair, I probably spent more time on this than on my full-time job, so calling it a side project may not be completely accurate. The internet is full of people ready to teach you about trading. Most
- 1 month ago, 8 Dec 2019, 08:05pm -
Marcos @LopezDePrado testifies before U.S. Congress [Mathematical Investor]
Famed quantitative financial mathematician Marcos Lopez de Prado, who was recently featured as Master of the Robots by Bloomberg, testified today (6 December 2019) before the U.S. Congress, together with four other panelists. The topic for the panel, organized by the U.S. House Committee on
- 1 month ago, 8 Dec 2019, 08:05pm -
Equity return anomalies and their causes [SR SV]
The vast range of academically researched equity return anomalies can be condensed into five categories: [1] return momentum, [2] outperformance of high valuation, [3] underperformance of high investment growth, [4] outperformance of high profitability, and [5] outperformance of stocks subject to
- 1 month ago, 8 Dec 2019, 08:04pm -
Yield Curve Empirics [Scalable Capital]
Interest rates measure the level of compensation that financial market participants get for lending money. The level of compensation for lending varies over time and is related to several other economic factors. Most important ones are rates set by central banks, inflation rates and underlying
- 1 month ago, 6 Dec 2019, 11:10pm -
Using Kalman filters to derive predictive factors from limit order book data [Alex Botsula]
This post is based on the experience I have got while taking part in a very interesting forecasting competition hosted by XTX. Participants were challenged by the task to forecast the future return of a (presumably) Forex asset based on the limit order book (LOB) data. No details of the asset or
- 1 month ago, 6 Dec 2019, 02:09pm -
Tactical Asset Allocation in November [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
- 1 month ago, 6 Dec 2019, 02:09pm -
Global Impact of Investor Home Country Bias [Alpha Architect]
A large body of research demonstrates that “familiarity breeds investment.” For example, a study by Gur Huberman found that shortly after AT&T was broken up and shareholders were given shares in each of what were called the Baby Bells, the residents of each region held a disproportionate
- 1 month ago, 6 Dec 2019, 02:08pm -
Experiments with GANs for Simulating Returns [EP Chan]
Simulating returns using either the traditional closed-form equations or probabilistic models like Monte Carlo has been the standard practice to match them against empirical observations from stock, bond and other financial time-series data. (See Chan and Ng, 2017 and Lopez de Prado, 2018.) Some of
- 1 month ago, 5 Dec 2019, 10:53am -
Leveraged Trading [Following the Trend]
I tend to be a little skeptical when I see books aimed at retail traders with low amount of trading capital, focusing on leveraged trading on FX, CFDs and the like. The very mention of retail forex trading means that there’s a near certainty that whatever comes next is misinformed at best and a
- 1 month ago, 5 Dec 2019, 10:53am -
The 60/40 Benchmark Portfolio [Quant Start]
In a recent article we introduced systematic tactical asset allocation (TAA) as a low-frequency example of quantitative trading strategy. For those who are taking their first steps in systematic trading, are wanting to consider systematic trading in the context of their retirement planning or are
- 1 month ago, 5 Dec 2019, 10:53am -
Adaptive VIX Moving Average with Ehlers Alpha Formula [CSS Analytics]
In the last post I described a relatively simply method to incorporate the VIX into the well-known AMA or Adaptive Moving Average framework. The alpha formula requires two separate parameters- a short and a long-term constant which requires greater specification by the user. Ideally the fewer
- 1 month ago, 4 Dec 2019, 11:13am -
Mitigating overfitting on Trading Strategies [Quant Dare]
According to Wikipedia “in finance, a trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets. The main reasons that a properly researched trading strategy helps are its verifiability, quantifiability, consistency, and objectivity. For
- 1 month ago, 4 Dec 2019, 11:13am -
Jim Simons: The man who solved the market [Mathematical Investor]
Gregory Zuckerman, author of The Greatest Trade Ever, has published a new book highlighting the life and work of Jim Simons, who, at the age of 40, walked away from a very successful career as a research mathematician and cryptologist to try his hand at the financial markets, and ultimately
- 1 month ago, 3 Dec 2019, 11:58pm -
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
- 1 month ago, 3 Dec 2019, 02:16pm -
Refresher: Integration, Co-Integration Stationarity [Auquan]
When working with time series financial data, stationarity (or lack thereof!) is going to be a defining aspect of how you conduct your analyses. In this article, we're going to give you a quick refresher of what these terms mean and how they affect your data. Let's start with importing the
- 1 month ago, 2 Dec 2019, 07:26pm -
Quantamental Investing - Change vs Patterns [Two Centuries Investments]
As readers would know, discussing ways to combine quant and fundamental investing has been a topic I care about (see some prior posts here, here and here). Perhaps I’m biased. But I believe that proper collaboration between quant and fundamental approaches is still a largely unexplored area. Yes,
- 1 month ago, 2 Dec 2019, 07:25pm -
Employing Human-Order in pandas DataFrame Sorting: Risk Factors and Tenors [Quant At Risk]
There are various Python projects which require sorting but not the ones that employ a default alphanumeric functionality. We talk about manually specified order or human-order, in short. One of such examples is the case study presented below. Imagine that your risk system provides you with a list
- 1 month ago, 2 Dec 2019, 07:24pm -
Myth-busting: Fed Actions and Stock Prices [Alpha Architect]
Since the global financial crisis, the financial press has periodically asserted that the Federal Reserve’s actions were the driving force behind rising stock prices. This study investigates this assertion by asking the following research question: Is there a relationship between stock prices and
- 1 month ago, 2 Dec 2019, 07:24pm -