Quant Mashup
Curated list of libraries, packages and resources for Quants [Milton FMR]
Numerical Libraries & Data Structures numpy — NumPy is the fundamental package for scientific computing with Python. scipy — SciPy (pronounced “Sigh Pie”) is a Python-based ecosystem of open-source software for mathematics, science, and engineering. pandas — pandas is an open source,
- 2 months ago, 7 Jun 2020, 11:13pm -
Downloading FX Pairs via Oanda API to Calculate Currency Strength Indicator [Dekalog Blog]
In the past I have posted a series of blog posts about a Currency Strength Indicator (here, here, here and here). This blog post gives an Octave function to use Oanda's API to download all the 10 minute OHLC data required to calculate the above strength indicators on the 10 minute time frame.
- 2 months ago, 7 Jun 2020, 11:12pm -
Fat Tails Everywhere? Profiling Extreme Returns: Part II [Capital Spectator]
It’s long been established that stock market returns aren’t normally distributed and that fat tails (extreme returns that are unexpected for a normal distribution) apply. This has implications, of course, for portfolio design and management. The first question: What are the choices for managing
- 2 months ago, 5 Jun 2020, 10:14am -
Excess Returns Podcast: Systematic Value Investing [Alpha Architect]
Recently I was invited to talk with Justin and Jack on the Excess Returns Podcast. I thank them for the opportunity and enjoyed the conversation! Below are some of the topics we discussed: Struggles in value and its long-term potential going forward. What would it take to convince you that value
- 2 months ago, 5 Jun 2020, 10:13am -
Why Aren't Call Options More Expensive Than Put Options? [Robot Wealth]
Why aren’t calls more expensive than puts for an asset which is more likely to go up than down? We have an asset trading at $100 for which the distribution of future returns is a known fact. It has annual returns described by a normal distribution with mean 5% and standard deviation 10%. This is,
- 2 months ago, 4 Jun 2020, 01:16pm -
Do Interest Rates Explain Value’s Underperformance? [Alpha Architect]
From January 2017 through March 2020, the value premium, defined by HML (the return of high book-to-market stocks minus the return of low book-to-market stocks experienced a drawdown of 42 percent. 1 If we extend the period back to January 2007, the drawdown of about 51 percent is the largest ever.
- 2 months ago, 4 Jun 2020, 01:15pm -
Why We Use Apache Beam For Our Systematic Trading Data Pipeline [Robot Wealth]
In the world of Big Data, there are lots of tools and technologies to choose from. Choosing the “right” one depends on the things that you are building and the problems you are trying to solve. Trading firms have skilled teams that monitor and deploy data pipelines for their organisation and the
- 2 months ago, 3 Jun 2020, 11:02am -
Variational autoencoder as a method of data augmentation [Quant Dare]
In this blog we’ve talked about autoencoders several times, both as outliers detection and as dimensionality reduction. Now, we present another variation of them, variational autoencoder, which makes possible data augmentation. If you have ever faced Machine Learning problems, you will have dealt
- 2 months ago, 3 Jun 2020, 11:02am -
Petra on Programming: The Correlation Cycle Indicator [Financial Hacker]
The previous article dealt with indicators based on correlation with a trend line. This time we’ll look into another correlation-based indicator by John Ehlers. The new Correlation Cycle indicator (CCY) measures the price curve correlation with a sine wave. This works surprisingly well – not for
- 2 months ago, 2 Jun 2020, 10:40pm -
How I Explain Crappy Returns [Alpha Architect]
Diversification. It looks great on paper, but for the past ten years, being globally and “Factor” diversified has been anything but great. Understandably, many diversified investors are looking at their returns and wondering why they should follow such a strategy when the S&P 500 – which
- 2 months ago, 2 Jun 2020, 10:39pm -
Machine learning is simply statistics - part 2 [Eran Raviv]
Another opinion piece. If you can’t explain it simply you don’t understand it well enough. (Albert Einstein) Rant in progress A bit on Deep Learning What is so deep about deep learning? Nothing. There is nothing deep about it. If you read through the excellent Deep Learning book you can see (p.
- 2 months ago, 2 Jun 2020, 09:45am -
Working with Tidy Financial Data in tidyr [Robot Wealth]
Holding data in a tidy format works wonders for one’s productivity. Here we will explore the tidyr package, which is all about creating tidy data. In particular, let’s develop an understanding of the tidyr::pivot_longer and tidyr::pivot_wider functions for switching between different formats of
- 2 months ago, 2 Jun 2020, 09:44am -
How to Get (Almost) Free Tick Data [Black Arbs]
Access to high quality, cost effective market data is a continuing problem for retail traders. I was recently told about the ongoing efforts of the startup brokerage “Alpaca”. The gentleman I spoke with said the API gave access to the tick data of thousands of stocks everyday and without cost. I
- 2 months ago, 2 Jun 2020, 01:58am -
Is value dead? Has the story changed? No. [Alpha Architect]
Although there is widespread agreement that systematic value strategies have turned in at least a decade of underperformance, there is little agreement as to the underlying cause or cause(s). However, a number of rationalizations and critiques have emerged that question the long term viability of
- 2 months ago, 2 Jun 2020, 01:58am -
Mean Reversion Strategies in Python (Course Review) [Black Arbs]
In this post I will be reviewing the course “Mean Reversion Strategies by Dr. E.P. Chan” ( His research and publications have garnered widespread appreciation, over the years. Unfortunately for Python programmers most of his past research was done in Matlab. Matlab was a very popular tool for
- 2 months ago, 2 Jun 2020, 01:57am -
Exploiting The Non-Farm Payrolls Drift [Robot Wealth]
Anyone that’s been around the markets knows that the monthly release of the United States Department of Labor’s Non-Farm Payrolls (NFP) data can have a tremendous impact, especially in the short term. NFP is a snapshot of the state of the employment situation in the US, representing the total
- 2 months ago, 1 Jun 2020, 09:54am -
Bonds & The Invisible Thief [Factor Research]
US bonds generated positive total returns in most inflation regimes Returns were mixed when inflation was above 4% Real returns were strongly negative when inflation was high INTRODUCTION Inflation is like cancer. It largely happens out of plain sight and requires focus to be noticed. The data is
- 2 months ago, 1 Jun 2020, 09:53am -
Online Portfolio Selection: Pattern Matching [Hudson and Thames]
Pattern matching locates similarly acting historical market windows and makes future predictions based on the similarity. They combine the strengths of both momentum and mean reversion by exploiting the statistical correlations of the current market window to the past. In the following blog post, we
- 2 months ago, 31 May 2020, 10:48pm -
The Livermore System: Part 1 | Trading Strategy (Filters) [Oxford Capital]
I. Trading Strategy Source: Kaufman, P. J. (2020). Trading Systems and Methods. New Jersey: John Wiley & Sons, Inc. Concept: Momentum trading strategy based on Jesse Livermore‘s approach to swing trading. Research Goal: Performance verification of Swing Filter and Penetration Filter.
- 2 months ago, 31 May 2020, 10:47pm -
Mad methods [OSM]
Over the past few weeks, we’ve examined the three major methods used to set return expectations as part of the portfolio allocation process. Those methods were historical averages, discounted cash flow models, and risk premia models. Today, we’ll bring all these models together to compare and
- 2 months ago, 29 May 2020, 09:03pm -
Two Different Methods to Apply Some Corey Hoffstein Analysis to your TAA [QuantStrat TradeR]
So, first off: I just finished a Thinkful data science in python bootcamp program that was supposed to take six months, in about four months. All of my capstone projects I applied to volatility trading; long story short, none of the ML techniques worked, and the more complex the technique I tried,
- 2 months ago, 29 May 2020, 02:50pm -
Smart(er) Investing - The Easy Way [Alpha Architect]
Most of the time we make you “earn your education” by reading our posts to build up your knowledge of the latest and greatest academic research concepts. That said, we understand there are different ways to educate, which is why we’re experimenting with video and audio. In the videos below, 3
- 2 months ago, 29 May 2020, 01:15pm -
Performant R Programming: Chunking a Problem into Smaller Pieces [Robot Wealth]
When data is too big to fit into memory, one approach is to break it into smaller pieces, operate on each piece, and then join the results back together. Here’s how to do that to calculate rolling mean pairwise correlations of a large stock universe. Background We’ve been using the problem of
- 2 months ago, 28 May 2020, 10:31am -
S&P 500 Dividend Aristocrats [Alvarez Quant Trading]
Back in 2018, I wrote a post, Backtesting a Dividend Strategy, which was conceptually based on the S&P 500 Dividend Aristocrats. Just recently, Norgate Data started offering historical constituent data for the S&P 500 Dividend Aristocrats index. This would be a much ‘cleaner’ version
- 2 months ago, 28 May 2020, 10:30am -
SPX Historically Bullish On Thursday After Memorial Day [Quantifiable Edges]
Thursday after Memorial Day has been a day that has exhibited a bullish bias for many years. I last showed this on the blog a couple of years ago. The chart below shows updated results. SPX Perfromance on Thursday After Memorial Day Single-day seasonality can certainly be overrun by other forces,
- 2 months ago, 28 May 2020, 10:30am -
How to Fill Gaps in Large Stock Data Universes Using tidyr and dplyr [Robot Wealth]
When you’re working with large universes of stock data you’ll come across a lot of challenges: Stocks pay dividends and other distributions that have to be accounted for. Stocks are subject to splits and other corporate actions which also have to be accounted for. New stocks are listed all the
- 2 months ago, 27 May 2020, 10:43am -
Two Centuries of Value and Momentum [Two Centuries Investments]
As a quant, I have been obsessed with systematic Value and Momentum since the first day I ran a backtest. Part of me knows that the future for this combo is unlikely to be as good as the past. In my R&D, I moved on to other factors more than a decade ago. But another part of me is still in love
- 2 months ago, 26 May 2020, 11:35am -
Tactically Adjusting Everything in a Financial Crisis? Bad Idea. [Alpha Architect]
With the current market conditions and the wild ride we’ve all been on, we’ve pivoted our attention to focus on supplying academic research on responding to a crisis. This article investigates what the appropriate tactical adjustments investors should consider when making changes to their
- 2 months ago, 26 May 2020, 11:35am -
How to develop, test and optimize a trading strategy - complete guide [Milton FMR]
Developing a trading strategy from start to finish is a complex process. The process follows the following steps: Formulation of the strategy Write Pseudo Code Transform into working code Start first backtests Optimize Evaluate test results Go live Monitor performance Evaluate and adjust
- 2 months ago, 26 May 2020, 10:38am -
Tactical ETFs: Tactfully No, Thank You? [Factor Research]
Tactical investing aims to deliver better risk-adjusted returns and/or reduced drawdowns Tactical ETFs have not achieved either objective in recent years It is challenging to explain the consistent underperformance across different types of tactical ETFs INTRODUCTION Every investor is a tactician,
- 2 months ago, 26 May 2020, 10:37am -
Find Cheap Options for Effective Crash Protection Using Crash Regressions [Robot Wealth]
One way we can quantify a stock’s movement relative to the market index is by calculating its “beta” to the market. To calculate the beta of MSFT to SPY (for example) we: calculate daily MSFT returns and daily SPY returns align the returns with one another regress MSFT returns against SPY
- 2 months ago, 26 May 2020, 04:34am -
Defensive Equity with Machine Learning [Flirting with Models]
Defensive equity strategies are comprised of stocks that lose less than the market during bear markets while keeping up with the market during a bull market. Coarse sorts on metrics such as volatility, beta, value, and momentum lead to diversified portfolios but have mixed results in terms of their
- 2 months ago, 25 May 2020, 09:59pm -
Long-Short vs Long-Only Implementation of Equity Factors [Quantpedia]
How should be equity factor strategies implemented? In a long-only (smart beta) way? As a long-short strategy, as most of the hedge funds usually do? Or in a partially-hedged fashion by going long equity factor and shorting market to offset some of the market risks? There is no one universal answer
- 2 months ago, 25 May 2020, 09:59pm -
Rolling and Expanding Windows For Dummies [Robot Wealth]
In today’s article, we are going to take a look at rolling and expanding windows. By the end of the post, you will be able to answer these questions: What is a rolling window? What is an expanding window? Why are they useful? What is a Rolling or Expanding window? Here is a normal window. We use
- 2 months ago, 25 May 2020, 10:01am -
Joint predictability of FX and bond returns [SR SV]
When macroeconomic conditions change rational inattention and cognitive frictions plausibly prevent markets from adjusting expectations for futures interest rates immediately and fully. This is an instance of information inefficiency. The resulting forecast errors give rise to joint predictability
- 2 months ago, 25 May 2020, 10:00am -
Research Review | 22 May 2020 | Tail Risk [Capital Spectator]
The Law of Regression to the Tail: How to Mitigate COVID-19, Climate Change, and Other Catastrophic Risks Bent Flyvbjerg (University of Oxford) 13 May 2020 Regression to the mean is nice and reliable, regression to the tail is reliably scary. We live in the age of regression to the tail. It is only
- 2 months ago, 22 May 2020, 11:30am -
Speaking to Legends: New Podcast from The Team at The Quant Conference (@TheQuantConf) [Speaking to Legends]
Speaking to Legends is a quest for ideas, insights, and stories from the lives of the most successful hedge fund managers. We learn about their spectacular careers, we share life lessons and dissect their investment techniques. Join us for this journey.
- 2 months ago, 21 May 2020, 12:56pm -
Handling a Large Universe of Stock Price Data in R: Profiling with profvis [Robot Wealth]
Recently, we wrote about calculating mean rolling pairwise correlations between the constituent stocks of an ETF. The tidyverse tools dplyr and slider solve this somewhat painful data wrangling operation about as elegantly and intuitively as possible. Why did you want to do that? We’re building a
- 2 months ago, 21 May 2020, 10:26am -
VADER Sentiment Analysis in Algorithmic Trading [Quant Insti]
In Finance and Trading, a large amount of data is generated every day. This data comes in the form of News, Scheduled Economic releases, employment figures, etc. It is clear that the news has a great impact on the prices of stocks. Every trader takes great efforts in keeping track of the latest news
- 2 months ago, 21 May 2020, 10:26am -
An Improved Volume Profile Chart with Levels [Dekalog Blog]
Without much ado, here is the code ## Copyright (C) 2020 dekalog ## ## This program is free software: you can redistribute it and/or modify it ## under the terms of the GNU General Public License as published by ## the Free Software Foundation, either version 3 of the License, or ## (at your option)
- 2 months ago, 21 May 2020, 10:26am -
How to Wrangle JSON Data in R with jsonlite, purr and dplyr [Robot Wealth]
Working with modern APIs you will often have to wrangle with data in JSON format. This article presents some tools and recipes for working with JSON data with R in the tidyverse. We’ll use purrr::map functions to extract and transform our JSON data. And we’ll provide intuitive examples of the
- 2 months ago, 20 May 2020, 09:52am -
A Big Gap Up That Wipes Out A Big Loss Yesterday [Quantifiable Edges]
After closing down more than 1% yesterday, SPY is set to open up enough to erase all of yesterday’s losses. I decided to look back at other times this has happened. SPY Big Gap Up Erases Yesterdays Loss - Open to Close Results Not exactly a consistent edge, but I thought the general upside
- 2 months ago, 20 May 2020, 09:52am -
Probabilistic Sharpe Ratio [Quant Dare]
Can a Sharpe ratio of 1.55 be better than a Sharpe ratio of 1.63 in a 1 year track-record? Not necessarily. Sharpe ratios are not comparable, unless we control the skewness and kurtosis of the returns. In this post we are going to analyze the advantages of the Probabilistic Sharpe Ratio exposed by
- 2 months ago, 20 May 2020, 09:52am -
Implied risk premia [OSM]
In our last post, we applied machine learning to the Capital Aset Pricing Model (CAPM) to try to predict future returns for the S&P 500. This analysis was part of our overall project to analyze the various methods to set return expectations when seeking to build a satisfactory portfolio. Others
- 2 months ago, 19 May 2020, 12:11pm -
Prospect Theory Helps Explain Return Anomalies [Alpha Architect]
The field of behavioral finance provides us with fascinating insights into individual investor behavior, including how individuals view risk, as well as the impact of those views on asset prices. Prospect theory plays a major role in explaining investor behavior. The theory, formulated in 1979 by
- 2 months ago, 19 May 2020, 12:11pm -
Using Digital Signal Processing in Quantitative Trading Strategies [Robot Wealth]
In this post, we look at tools and functions from the field of digital signal processing. Can these tools be useful to us as quantitative traders? What’s a Digital Signal? A digital signal is a representation of physical phenomena created by sampling that phenomena at discrete time intervals. If
- 2 months ago, 19 May 2020, 10:31am -
Trend Following the S&P 500? Some Practical Advice [Alpha Architect]
Now that market volatility is back, tail risk management strategies are gaining some attention. A lot of investors are dipping their toe into the water and exploring trend-following strategies on the S&P 500 — arguably the most popular U.S. stock market index.This paper explores multiple trend
- 2 months ago, 19 May 2020, 10:31am -
Periodically Rebalanced Static Allocation 'Buy and Hold' Strategies in QSTrader [Quant Start]
For those systematic traders who are considering a long-term investment horizon one of the most common forms of generating a portfolio involves static proportional capital allocation amongst a collection of (hopefully) diversifying asset classes, which is periodically rebalanced to maintain the
- 2 months ago, 19 May 2020, 10:30am -
Profiling S&P 500 Drawdowns Since 1871 [Capital Spectator]
Longer is better for analyzing the stock market, which is why Professor Robert Shiller’s data set (with an 1871 starting date) is one of the great free resources on the internet for studying the history of US equities. With that in mind, let’s review how the current drawdown for the S&P 500
- 2 months ago, 19 May 2020, 10:30am -
A Volume Profile With Levels Chart [Dekalog Blog]
Just a quick post to illustrate the latest of my ongoing chart iterations which combines a levels chart, as I have recently been posting about, but with the addition of a refined methodology of creating the horizontal histograms to more clearly represent the volumes over distinct periods. The main
- 2 months ago, 19 May 2020, 10:30am -