In the realm of investment strategies, simplicity has long been favored. Traditional models with a limited number of parameters are prized for their interpretability and ease of use. However, recent research challenges this convention, suggesting that embracing complexity can lead to more accurate

We think of momentum and mean reversion as opposing forces—pick one or the other. Yet, data from 2000 shows that blending both via a local adaptive learning filter produces 20% CAGR on liquid equities versus 8% buy-and-hold. Traders ignoring this hybrid edge are leaving significant extra returns

Welcome to the second part of this two-part blog series on the bias-variance tradeoff and its application to trading in financial markets. In the first part, we attempted to develop an intuition for bias-variance decomposition. In this part, we’ll extend what we learned and develop a trading

Time for another round of the latest investing research. Below is a curated list of last week’s highlights, each linked to the original source for easy access. Appreciate your continued support! If you’re finding value in these posts, feel free to like and subscribe if you haven’t already.

"If you're not thinking about risk, then you're not thinking." William Sharpe. William Sharpe is a Nobel Prize-winning economist renowned for his work on the Capital Asset Pricing Model (CAPM) and the Sharpe Ratio, both of which highlight the central role of risk in pricing and

The popularity of trend-following bears the risk of market excesses. Medium-term market price trends often fuel economic trends that eventually oppose them (”macro headwinds”). Fortunately, relevant point-in-time economic indicators can provide critical information on the sustainability of

I recently covered calendar anomalies in the stock markets. Interestingly, patterns over time also appear in the volatility space. In this post, I’ll discuss the seasonality of volatility risk premium (VRP) in more detail. Breaking Down the Volatility Risk Premium: Overnight vs. Intraday Returns

Bitcoin Arbitrage: The Role of a Single Exchange (Flowerday, Gandal, Halaburda, Olson, and Ardel) Cross-exchange arbitrage has historically been common in crypto markets. This paper analyzes Bitcoin price differences across major exchanges from 2017 to 2020 and finds that Bitfinex was responsible

Finishing our little mini-series on shorter-term futures trading we talk to Andrea Unger and happily inject some click-bait in the form of gloating about his 672% return in a single year when he won the World Trading Competition. Naturally, we know that this kind of return is generated by

Two minute to 30 minute horizon: Mean reversion works, and is most effective at the 4-8 minute horizon from a predictive perspective; although from a Sharpe Ratio angle it's likely the benefits of speeding up to a two minute trade window would overcome the slight loss in predictability. There

This article explores how researchers forecast market returns by aggregating expected returns from individual stocks. Using machine learning, they improve accuracy over traditional methods. The approach helps identify when to increase or reduce market exposure. This can lead to better-informed

The correlation between stocks and bonds plays a crucial role in portfolio allocation and diversification strategies. In this issue, I discuss stock-bond relationships, the factors that influence their correlation, and techniques for forecasting it. What Influences Stock-Bond Correlation?

Clustering consists in trying to identify groups of “similar behavior”1 - called clusters - from a dataset, according to some chosen characteristics. An example of such a characteristic in finance is the correlation coefficient between two time series of asset returns, whose usage to partition a

The financial research literature has found that the performance of assets (and factors) can vary substantially across regimes (for example, see here and here)—factor premiums can be regime dependent. Unfortunately, the real-time identification of the current economic regime is one of the biggest

I was recently talking to someone about data mining as an approach to finding edges to trade. I get the appeal. Feed enough data into a computer, run enough tests, and surely something profitable will emerge, right? Maybe. But almost certainly not. But the worst thing about this approach is that it

Pragmatic Asset Allocation (PAA) represents a portfolio construction approach that seeks to balance the benefits of systematic trend-following with the realities faced by semi-active investors (mainly taxes and lack of time to manage positions). Building upon the insights presented in Quantpedia’s

Time for another batch of top-tier investing research. Below is a carefully curated list of great papers from last week, each linked to the original source for easy access. If you’re enjoying these posts, a like or subscribe is always appreciated, thank you for your support! Asset Allocation

This is a test of a dynamic seasonality strategy from Quantpedia that selects from 23 individual country ETFs. We’ve extended the author’s test by 30+ years using MSCI index data. Backtested results from 1971 follow versus an equal-weight benchmark of those 23 country ETFs (1). Learn more about

Hello all, Just little over 24 hours remain until the end of the deadline for QUANTPEDIA AWARDS 2025 – April 30th, 2025, at 23:59 UTC. Join the competition now, and don’t miss out on this chance to showcase your skills! Alternatively, if you can’t (or don’t want) to join, then please help us

Ever heard the term "IPO" thrown around in financial news? Let's break down what it means and why it might be interesting for systematic traders. What Exactly is an IPO? "IPO" stands for "Initial Public Offering." It's the very first time a private company

Compared to traditional futures or equities, crypto markets offer greater transparency—thanks primarily to the public blockchain and also to the unique culture that shaped the industry. This opens up new opportunities for investors and traders to monitor and measure liquidity dynamics that are

This article explains how researchers studied small investors’ trading habits by looking at tiny price differences, called subpennies, in stock trades. They found that the current method to identify these trades isn’t very accurate. By using a new approach, they improved the accuracy, helping to

Short-term reversal strategies in U.S. large-cap equity indexes, such as the S&P 500, are well-documented and widely followed. These reversals often occur in response to brief periods of market stress, where sharp declines are followed by quick recoveries (as we have experienced in the last few

Boosting is a machine learning ensemble method that combines the predictions of a chain of basic models, whereby each model seeks to address the shortcomings of the previous one. This post applies adaptive boosting (Adaboost) to trading signal optimisation. Signals are constructed with macro factors

Geopolitical tensions, such as wars, threats, or major international conflicts, are known to affect economies and markets. In recent years, several papers have examined the impact of geopolitical risk on stock returns. For example, Sheng et al. (2025) construct a risk index based on news articles

In Part II with Kevin, he delves into the intricate mechanics behind his systematic futures trading approach, offering advanced quantitative traders a window into the finer points of strategy design, walk forward analysis, robustness testing, and portfolio construction. Drawing on decades of

“The biggest lesson that can be read from 70 years of AI research is that general methods that leverage computation are ultimately the most effective, and by a large margin.” Richard Sutton. Richard Sutton is one of the greatest minds of our time. He is a founding figure in modern AI and a

As the world’s attention shifts from the US-centric equity markets to international equity markets (which strongly outperform on the YTD basis), we could review some interesting anomalies and patterns that exist outside of the United States. In the world of monetary policy, traders have long

Members: See the complete list of Meta Walk-Forwards In our previous post, we introduced this concept of “walking forward” optimal strategy combinations. In other words, we’re finding the optimal combination of strategies, in real-time, based only on data available at that moment in time. We

This is part 1 of our in-depth investigation of how quantitative risk management could help improve risk-adjusted returns: I'll explain what volatility targeting is, explore a seemingly paradoxical phenomenon, and highlight its blindspots. Volatility targeting’s goal is to keep an asset or

It’s time for another round of great investing research. Below is a curated selection of last week’s highlights, each linked to the original source for easy reading. If you’re enjoying these posts, a like or subscribe is always appreciated, thank you for your support! And may I kindly ask you

This article explores the difference between tradable and on-paper (theoretical) risk factors in investing. Risk factors are strategies that help explain stock market returns, but many work only in theory and not in real life. Researchers developed ways to make these factors tradable by using mutual

Machine learning (ML) has made a lot of progress in recent years. However, there are still skeptics, especially when it comes to its application in finance. In this post, I will feature articles that discuss the pros and cons of ML. In future editions, I’ll explore specific techniques. How

Given the recent market downturn, marked by the S&P 500 and the Nasdaq trading well below their 200-day moving averages, the familiar adage “Nothing good happens below the 200-day moving average” has once again gained traction in financial media. The 200-day simple moving average (200SMA) is

When you look at a chart of Bitcoin’s price from 2010 to today, it tells a story of volatility, resilience, and long-term gains. But what about the thousands of coins that launched, pumped, and then disappeared along the way? Most commonly used crypto datasets, especially those tied to current

In this week’s edition of Research Insights, I break down three recent papers. The first examines look-ahead bias in large language models. The second introduces a new approach to enhancing momentum strategies. The third explores how sensitive many cross-country return anomalies are to

There’s this Neumann quote: "With four parameters I can fit an elephant, and with five I can make him wiggle his trunk." Funny, but also true. It’s very fitting (haha) to our job at Unravel where we scan tens of thousands of time series in order to identify the ones that can be used as

In recent months, financial markets have experienced heightened volatility as Donald Trump, in his second term as President of the United States, increasingly uses executive orders to steer economic policy. While he also made use of this presidential power during his first term (2017–2021), the

I trust everyone is having a relaxing Passover week and is ready to devour some trading wisdom from Kevin Davey, an algorithmic trader with over 30 years of experience and a background in aerospace engineering and quality assurance, who exemplifies the importance of a disciplined process in trading.

Momentum is a financial anomaly in which buying stocks with positive past returns and selling the negative yielding ones has delivered positive returns. After Jegadeesh and Titman (1993)’s seminal paper “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency”

With financial markets increasingly whipsawed by geopolitical tensions and unpredictable policy shifts from the Trump administration—investors are once again questioning how to understand risk, fear, and the true drivers of returns. A recent and compelling paper dives into this debate with a

In this webinar, James explores a simple seasonality effect and finds that there’s more to the story than an upwardly sloping equity curve. Watch the video to see how you can use Excel to explore market phenomena efficiently and gather evidence that you can use to make practical trading decisions.

The SPX is going to experience a Death Cross today at the close. I’ve written many times in the past about “Death Crosses”. A Death Cross is when the 50ma crosses below the 200ma. It is confirmation of a downtrend. Some people view it as a bearish signal. As you’ll see, it is not a great

Time for another round of great investing research. Below is a curated list of last week’s highlights, each linked to the original source for easy access. Appreciate your continued support! If you’re finding value in these posts, feel free to like and subscribe if you haven’t already. Bonds

nd Strategies Subscribe to newsletter Calendar anomalies in the stock market refer to recurring patterns or anomalies that occur at specific times of the year, month, or week, which cannot be explained by traditional financial theories. These anomalies often defy the efficient market hypothesis and

Mad out there isn't it? Tarrifs on/off/on/partially off/on... USD/SP500/Gold/US10/Bitcoin all yoyoing like crazy. Seems a good moment to be slightly reflective. I skipped my annual performance update last year, a little sad given it was my tenth anniversary. Mainly this is because it had become

Quantamental economic surprises are point-in-time measures of deviations of economic indicators from expected values. There are two types of surprises: first-print events and pure revisions. First-print events feature new observation periods, and the surprise element depends on market expectations

A catastrophe (CAT) bond is a debt instrument designed to transfer extreme event risks from insurers to capital market investors. They’re important for financial institutions, especially insurers and reinsurers, because they offer a way to manage large, low-probability. In this post, I feature

In this week’s “Research Insights,” I cover three interesting papers. The first examines the performance of crypto breakout strategies. The second questions the reliability of the 4% withdrawal rule amid today’s market turmoil and inflation concerns, while the third explores how commodity

One of the simplest form of trend trading opens positions when the price crosses its moving average, and closes or reverses them when the price crosses back. In the latest TASC issue, Perry Kaufman suggested an alternative. He is using a linear regression line with an upper and lower band for trend