Quant Mashup
Why Pension Funds & Millennials Should Avoid ESG [Factor Research]
ESG ETFs underperformed the stock market since 2005 Likely explained by higher fees, a constrained stock universe, and sector bets Financially-impaired investors like public pension funds and Millennials should avoid ESG investing INTRODUCTION If investors would be looking for the ETF flavor of the
- 1 month ago, 2 Dec 2019, 07:23pm -
How You Measure Months Matters — A Lot. A Look At Two Implementations of KDA [QuantStrat TradeR]
This post will detail a rather important finding I found while implementing a generalized framework for momentum asset allocation backtests. Namely, that when computing momentum (and other financial measures for use in asset allocation, such as volatility and correlations), measuring formal months,
- 1 month ago, 1 Dec 2019, 06:07pm -
RSI Hellfire Heatmap Indicator [Philipp Kahler]
Chart analysis is all about visualizing data. The RSI hellfire indicator uses a heat-map to visualizes how overbought or oversold the market is on a broad scale. This helps to get a broad picture of the current market setup. Multiple Time-frame Relative Strength Index Wells Wilder’s RSI is an old
- 1 month ago, 1 Dec 2019, 06:07pm -
Contribute to The Alpha Scientist blog! [Alpha Scientist]
You may have noticed that this blog has been mostly inactive in 2019. Earlier this year, I took a full-time position with one of my buy-side consulting clients focused on researching methodologies for application of ML / data science to alpha research. While I'm thoroughly enjoying the work, it
- 1 month ago, 29 Nov 2019, 06:41pm -
Automated Trading Systems: Architecture, Protocols, Types of Latency [Quant Insti]
The automated trading system or Algorithmic Trading has been at the centre-stage of the trading world for more than a decade now. A “trading system”, more commonly referred as a “trading strategy” is nothing but a set of rules, which is applied to the given input data to generate entry and
- 1 month ago, 29 Nov 2019, 05:35am -
Financial Models Numerical Methods in Jupyter Notebooks (h/t @PyQuantNews)
This is a collection of Jupyter notebooks based on different topics in the area of quantitative finance. Is this a tutorial? Almost! 🙂 This is just a collection of topics and algorithms that in my opinion are interesting. It contains several topics that are not so popular nowadays, but that can be
- 1 month ago, 29 Nov 2019, 05:34am -
When the Wednesday Before Thanksgiving Closes at a New High [Quantifiable Edges]
Thanksgiving has some seasonal tendencies, with Wednesday and Friday often being bullish, and the Monday after being bearish. This year not only did Wednesday perform well, but it left the SPX at a new high heading into the holiday. So I decided to look back at other times SPX closed at a 50-day
- 1 month ago, 29 Nov 2019, 05:32am -
Black & Scholes for Puts/Calls in a Single Excel Cell [Six Figure Investing]
Sometimes an online option calculator isn’t enough and you’d like to implement the Black & Scholes (B&S) option pricing equations in Excel. If you’re just playing around it doesn’t matter how you structure the calculation. In fact, for clarity’s sake, it’s probably a good idea to
- 1 month ago, 27 Nov 2019, 09:26pm -
Forbidden Knowledge: Long-Only Academic Factors are Also Cool [Alpha Architect]
The standard academic approach to factor analysis is through the lens of long-short portfolios (which often confuses practitioners!). For example, a researcher may take the universe of the largest 1,000 stocks and sort them on “value”, as measured via book-to-market. The “value factor”
- 1 month ago, 27 Nov 2019, 09:25pm -
Adaptive VIX Moving Average [CSS Analytics]
One of the challenges with technical or quantitative analysis is to identify strategies that can adapt to different market regimes. The most obvious is a change in the forecast or implied volatility as proxied by the VIX. During more volatile periods we would expect more signal noise and during less
- 2 months ago, 26 Nov 2019, 10:06pm -
Enterprise Multiples and Equity Country Allocations [Alpha Architect]
The use of valuation multiples in selecting equity securities is well established in the literature, and we’ve covered the research on enterprise multiples here (here is a recent JPM on the topic). However, there are relevant questions as to the effectiveness of multiples when applied to national
- 2 months ago, 26 Nov 2019, 10:06pm -
Diversification: More Than "What" [Flirting with Models]
- 2 months ago, 26 Nov 2019, 10:05pm -
Are Earnings Forecasts of Sell-side Analysts Biased? [Alpha Architect]
There is a substantial body of evidence linking various accounting ratios to expected stock returns. One explanation of the links is that they could be explained by the accounting ratios being associated with systematic sources of risk. Alternatively, they could be associated with mispricing that
- 2 months ago, 26 Nov 2019, 10:05pm -
Inverview with @PaulNovell: Investing for a living, financial independence and early retirement [System Trader Show]
It happens very often that we work because we don’t see any alternatives. Our job may be annoying as hell, we may even hate it, but the reality seems like we don’t have any other options. We have a mortgage, we have a family to maintain, or our qualifications aren’t allowing us to do something
- 2 months ago, 25 Nov 2019, 08:45am -
Do Activist Investors Create Value? [Factor Research]
Shareholder activism has not grown from a campaign or AUM perspective recently Activist funds have not generated attractive returns The lack of outperformance is challenging to explain INTRODUCTION Active fund managers today are like deer caught in the headlights of oncoming traffic as the
- 2 months ago, 25 Nov 2019, 08:44am -
Pivot Point Strategy [Quant Insti]
In this project, we analyze different intraday trading strategies with Pivot Points. After defining different ways of calculating the Pivot Point, we do a Backtest with the most classic strategies and a different variant to those normally taught in textbooks. To learn about Pivot Point and how to
- 2 months ago, 23 Nov 2019, 01:35am -
Research Review | 22 November 2019 | Factor Investing Strategies [Capital Spectator]
ETF Momentum Frank Weikai Li (Singapore Management University), et al. October 12, 2019 We document economically large momentum profits when sorting ETFs on returns over the past two to four years. A value-weighted, long-short strategy based on ETF momentum delivers Carhart (1997) four-factor alphas
- 2 months ago, 23 Nov 2019, 01:35am -
Basic factor investment for bonds [SR SV]
Popular factors for government bond investment are “carry”, “momentum”, “value” and “defensive”. “Carry” depends on the steepness of the yield curve, which to some extent reflects aversion to risk and volatility. “Momentum” relates to medium-term directional trends, which in
- 2 months ago, 23 Nov 2019, 01:34am -
The Investor's Podcast: Factor Investing (Jack) [Alpha Architect]
Recently I was invited to talk with Stig and Preston on The Investor’s Podcast. I thank them for the opportunity and enjoyed the conversation! Below are some of the topics we discussed: What is factor investing? Which factors have historically performed the best? Should one use a single factor or
- 2 months ago, 23 Nov 2019, 01:34am -
It's time for a modern, standardized trading interface, suitable for the web-age [Ran Aroussi]
In this post, I share my vision for an Open Trading standard for communicating with online brokers using modern technologies. While looking for a way to add support for multiple brokers and data vendors to my open source Python trading library, I discovered that there's currently no way to
- 2 months ago, 21 Nov 2019, 07:14pm -
Are Value, Carry and Momentum Regime Dependent? [Alpha Architect]
Over the past decade academics and practitioners alike have argued that multi-factor portfolios offer significant benefits to investors looking for enhanced and more diversified solutions. Among the papers making this argument is “The Death of Diversification is Greatly Exaggerated”, co-authored
- 2 months ago, 21 Nov 2019, 07:13pm -
Podcast w/ Andreas @Clenow: Trend Following Is About Taking A Lot Of Bets On A Large Number Of Markets [Meb Faber]
Guest: Andreas Clenow is the Chief Investment Officer of ACIES Asset Management AG. He manages alternative investment funds for institutional and qualified investors. He has served as Nordic Manager for the Analytics Consulting division of Reuters Consulting, covering Sweden, Norway, Denmark,
- 2 months ago, 20 Nov 2019, 08:14pm -
Systematic Tactical Asset Allocation: An Introduction [Quant Start]
Systematic trading is often synonymous with short-term trading frequencies in the retail quant trading space. Daily and intraday strategies tend to receive the bulk of the community's attention. The popularity of systematic cryptocurrency trading has put a further emphasis on short term trading
- 2 months ago, 20 Nov 2019, 09:33am -
One Look At What Recent SPX Persistence Might Mean [Quantifiable Edges]
One compelling study that triggered Tuesday in the Quantifinder suggested the recent persistent upmove is unlikely to abruptly end. (This is a theme we have seen many times over the years.) It considers what happens after the market moves up at least 5 days in a row to a 50-day high, and then pulls
- 2 months ago, 20 Nov 2019, 09:32am -
Volatility Clustering with Opening Range Breakout (ORB) [Oxford Capital]
Concept: Opening Range Breakout (ORB) with Volatility Clustering (Large price moves tend to be followed by large price moves, and small price moves tend to be followed by small price moves). Research Question: Can we improve performance of the original volatility clustering model via Opening Range
- 2 months ago, 20 Nov 2019, 09:32am -
The Dumb (Timing) Luck of Smart Beta [Flirting with Models]
In past research notes we have explored the impact of rebalance timing luck on strategic and tactical portfolios, even using our own Systematic Value methodology as a case study. In this note, we generate empirical timing luck estimates for a variety of specifications for simplified value, momentum,
- 2 months ago, 18 Nov 2019, 10:56am -
AI & Data Science in Trading Conference - March 16-18 in NYC
AI & Data Science in Trading brings together experts in the use of AI and advanced data analytic techniques within asset management, primarily for finding alpha, managing risk and optimizing portfolios. Now in its fifth edition, rotating between the global financial hubs of NYC and London, this
- 2 months ago, 18 Nov 2019, 08:45am -
Is Alpha a Convergent or Divergent Thought? [Two Centuries Investments]
Divergent thinking is what we learn in school when we are paying attention. It allows us to solve hard problems with one right answer. Convergent thinking is what happens when we stop paying attention and start doodling. Convergent thinking produces many answers, none of which are technically
- 2 months ago, 18 Nov 2019, 08:38am -
Parabolic SAR - An Introduction [Quant Insti]
In the market, it is crucial to spot the trend, but it is equally important to detect when the trend ends. Getting out of the trade is more difficult than entering the trade. In this blog, we will talk about one such technical indicator, the Parabolic SAR indicator, which helps in identifying when
- 2 months ago, 18 Nov 2019, 08:38am -
Equity vs Bond Indices [Factor Research]
Bond indices are frequently portrayed as featuring a lower quality composition than equity indices Analysing equity and bond indices in the US and emerging markets confirms this view Perhaps this explains why there is some alpha generation in fixed income INTRODUCTION While almost all fund managers
- 2 months ago, 18 Nov 2019, 08:37am -
IPO Exploration: Part 1 [Reproducible Finance]
Inspired by recent headlines like Fear Overtakes Greed in IPO Market after WeWork Debacle and This Year’s IPO Class is Least Profitable since the Tech Bubble, today we’ll explore historical IPO data and next time we’ll look at the the performance of IPO driven-portfolios constructed during the
- 2 months ago, 16 Nov 2019, 10:12am -
Endogenous market risk: updated primer [SR SV]
Endogenous risk arises from the interaction of financial market participants, as opposed to traded assets’ fundamental value. It often manifests as feedback loops after some exogenous shock. An important type of endogenous market risk is setback risk, which refers to the asymmetry of the upside
- 2 months ago, 16 Nov 2019, 10:11am -
State of Trend Following in October [Au Tra Sy]
A negative October takes the State of Trend Following index in the red for the year. Please check below for more details. Detailed Results The figures for the month are: October return: -3.92% YTD return: -3.23% Below is the chart displaying individual system results throughout October: StateTF
- 2 months ago, 16 Nov 2019, 10:10am -
Podcast: Jim Simons - The pinnacle of trading greatness w/ author @GZuckerman [Chat With Traders]
Gregory Zuckerman is a writer at the Wall Street Journal and author of The Man Who Solved the Market: How Jim Simons Launched The Quant Revolution. For anyone unfamiliar, Jim Simons is the brilliant-minded mathematician who founded hedge fund Renaissance Technologies. Using quantitative models and
- 2 months ago, 14 Nov 2019, 08:09pm -
How to avoid unwanted curve fitting during backtest [Philipp Kahler]
Whenever you develop an algorithmic trading strategy, curve fitting is one of the most dangerous hazards. It will lead to severe losses in real time trading. This article will show you some ways to detect if the performance of your algorithmic trading strategy is based on curve fitting. Curve
- 2 months ago, 14 Nov 2019, 08:07pm -
The Investment Factor and Expected Returns [Alpha Architect]
It is well documented in the literature that over the long term, low-investment firms have outperformed high-investment firms.(1) This finding has led to the investment factor (CMA, or conservative minus aggressive) being incorporated into the leading asset pricing models—the four-factor Q model
- 2 months ago, 14 Nov 2019, 08:06pm -
Hiring a Software Developer to Code Up a Trading Strategy [Quant Start]
At QuantStart we place an emphasis on fully automated systematic trading and the processes that surround it. However we should be careful to distinguish between the separate concepts of systemisation and automation. The former involves a trading strategy that can be codified into a set of rules,
- 2 months ago, 14 Nov 2019, 09:01am -
Trend-following vs. Momentum in ETFs [Alvarez Quant Trading]
In Tactical Asset Allocation (TAA) or Dual Momentum (DM) strategies, they often will use trend-following or momentum to decide whether to invest in asset or not. I have two questions. One, how often does either trend-following or momentum they beat buy and hold? Two, of the two which one beats the
- 2 months ago, 13 Nov 2019, 08:19pm -
Investment, Expected Investment, and Expected Stock Returns [Alpha Architect]
A new DFA article by Rizova and Saito (2019, “Investment and Expected Stock Returns”) (1) rehashes previous arguments in Fama and French (2006, 2015) on the investment factor. The core arguments are as follows: Valuation theory predicts that expected investment is negatively correlated with
- 2 months ago, 13 Nov 2019, 08:18pm -
Kurtosis and expected returns [Investment Idiocy]
In my last post, I stated my intention to write a series of posts about skew. Slight change of plan, since one loyal reader suggested that I write about kurtosis. I thought that might be fun, since I haven't thought about kurtosis much, and the literature on kurtosis isn't as well
- 2 months ago, 12 Nov 2019, 10:49am -
The Man Who Solved the Market – Notes [Systematic Edge]
When it comes to the world’s most secretive hedge fund any content is worthwhile to read. I finished the book is 3 days and had to re-read a couple more chapters to ensure I fully absorbed the couple nuggets in there. I would recommend this book to everyone! The mystery behind how Simons
- 2 months ago, 12 Nov 2019, 09:06am -
Investor IQ Website is Live (In Beta) [CSS Analytics]
For readers interested in getting signals and analytics on hundreds of ETFs and individual stocks our Investor IQ website is currently live and free during our beta-testing phase. We will be adding new data and analytics gradually over time as well as improving website functionality. The Economic
- 2 months ago, 12 Nov 2019, 09:06am -
Are Early Stage Investors Biased Against Women? [Alpha Architect]
Recent studies of startup activity in the U.S. find that only roughly 10–15% of startups are founded by women. There are a number of potential explanations including gender differences in technical training or risk preferences. However, many have also speculated that part of the gender gap may, in
- 2 months ago, 12 Nov 2019, 09:06am -
The Limit of Factor Timing [Flirting with Models]
We have shown previously that it is possible to time factors using value and momentum but that the benefit is not large. By constructing a simple model for factor timing, we examine what accuracy would be required to do better than a momentum-based timing strategy. While the accuracy required is not
- 2 months ago, 11 Nov 2019, 09:48am -
Two Centuries of Creativity Quantified [Two Centuries Investments]
In the past, I shared thoughts about the need to combine creative and organized thinking in order to generate investment alpha. “A robust investment process” and “a strict disciplined application” are concepts that one often hears in typical quant and fundamental investment teams. These are
- 2 months ago, 11 Nov 2019, 09:48am -
The Case Against REITs [Factor Research]
Real estate stocks featured moderate correlations to stock markets over the last 30 years However, diversification benefits for equity portfolios were only marginal Other strategies provide similar yield and downside protection characteristics INTRODUCTION Surveys often reveal investor behaviour
- 2 months ago, 11 Nov 2019, 08:28am -
Combine Market Trend and Economic Trend Signals? [CXO Advisory]
A subscriber requested review of an analysis concluding that combining economic trend and market trend signals enhances market timing performance. Specifically, per the example in the referenced analysis, we look at combining: The 10-month simple moving average (SMA10) for the broad U.S. stock
- 2 months ago, 11 Nov 2019, 08:28am -
What’s The Best Methodology For Measuring Drawdown Risk? [Capital Spectator]
The possibilities for quantifying risk in portfolio analytics seems to be limited only by the imagination of researchers. Indeed, you can find dictionaries that wade through an ever-lengthening list of indicators. But any short list of robust metrics surely deserves to include drawdown, which offers
- 2 months ago, 8 Nov 2019, 10:00am -
Buying Global Stocks at All-Time Highs [Allocate Smartly]
This analysis was inspired by EconomPic and Meb Faber. Here we test a simple strategy that goes long Global Stocks (ACWI) when they make a new all-time month-end high, otherwise US bonds. The takeaway: Don’t fear buying stock (indices) when they close at all-time highs. A new high shouldn’t be
- 2 months ago, 5 Nov 2019, 08:16pm -
Combinatorial Purged Cross-Validation Explained [Quantoisseur]
In this tutorial I explain how to adapt the traditional k-fold CV to financial applications with purging, embargoing, and combinatorial backtest paths.
- 2 months ago, 5 Nov 2019, 08:16pm -