Quant Mashup
Where is the Value? [Factor Investor]
Investors always want to know what’s cheap—cheap relative to the opportunity set and relative to history. Cheapness could refer to any number of things—price relative to trailing twelve months earnings, to trailing earnings over multiple years, to analyst earnings estimates, to long-run
- 1 month ago, 30 Jan 2019, 03:15am -
A Growing List of Long-Run Factor Studies [Two Centuries Investments]
While there exists a well-established (at least a century-old) academic interest in the long-run properties of asset class returns like the U.S. Equity, Fixed Income, Commodity and Real Estate Markets, only during the past decade, has there emerged a branch of literature studying the cross-sectional
- 1 month ago, 29 Jan 2019, 02:06pm -
Why Waiting Until The Announcement Is A Tough Way To Trade The Fed [Quantifiable Edges]
Wednesday is a Fed Day – a day in which the Federal Reserve concludes their scheduled meeting and releases a policy statement. Fed Days have historically shown a bullish inclination (up until Powell took over last year, as I showed on Sunday). One interesting aspect of Fed Days that I covered in
- 1 month ago, 29 Jan 2019, 02:05pm -
Tightening the Uncertain Payout of Trend-Following [Flirting with Models]
Long/flat trend-following strategies have historically delivered payout profiles similar to those of call options, with positive payouts for larger positive underlying asset returns and slightly negative payouts for near-zero or negative underlying returns. However, this functional relationship
- 1 month ago, 28 Jan 2019, 09:53pm -
HFT-like Trading Algorithm in 300 Lines of Code You Can Run Now [Alpaca]
Commission Free Trading API Trading with commission free API opened up many interesting ideas. Lots of people liked the idea of trading stocks using Google Spreadsheet, and some people have been building their own Slack integrations. You can even build a robo advisor that automates longer-term
- 1 month ago, 28 Jan 2019, 09:53pm -
“The Failure of Factor Investing was Predictable” [Alpha Architect]
In a recent ETF column, Allan Roth listed five investment lessons. While I agreed with much of what he wrote, one claim—factor investing has “failed miserably”— called for examination of the facts. But first, a little background. William Sharpe, Jack Treynor and John Linter are typically
- 1 month ago, 28 Jan 2019, 09:52pm -
Cross Validation in Machine Learning Trading Models [Quant Insti]
The application of the machine learning models is to learn from the existing data and use that knowledge to predict the future unseen events. The model needs to be thoroughly tested and cross-validated to profitably trade in live trading. After reading this, you will be able to: Cross validate
- 1 month ago, 28 Jan 2019, 09:52pm -
Value, Momentum and Carry Across Asset Classes [Factor Research]
Cross-asset multi-factor exposure might be an attractive diversifier for an equity portfolio Factors share trends across asset classes, indicating common drivers However, relationships are time-varying, increasing complexity and risks INTRODUCTION There is a 72% probability of the San Franciso Bay
- 1 month ago, 28 Jan 2019, 09:52pm -
Last Chance for Early Bird Pricing: AI and Data Science in Trading Conference, NYC March 2019
There is so much hype and confusion surrounding AI and alt data at the moment. The AI & Data Science in Trading conference separates the hype from the reality” Professor David Hand, Imperial College, London Finding alpha has always required asset managers to ‘raise the bar’ in terms of
- 1 month ago, 28 Jan 2019, 06:50am -
Value, Momentum & Carry Across Asset Classes [Alpha Architect]
There is a 72% probability of the San Franciso Bay Area getting hit by at least one earthquake of a magnitude of 6.7 or stronger between today and 2043 according to the United States Geological Survey, which is a scientific agency of the U.S. government. An earthquake of that magnitude is likely to
- 1 month ago, 28 Jan 2019, 12:07am -
R tips and tricks – higher-order functions [Eran Raviv]
A higher-order function is a function that takes one or more functions as arguments, and\or returns a function as its result. This can be super handy in programming when you want to tilt your code towards readability and still keep it concise. Consider the following code: # Generate some fake data
- 1 month ago, 28 Jan 2019, 12:06am -
Is Jerome Powell The Most Hated Fed Chairperson Ever? [Quantifiable Edges]
Fed Days have a long history of showing a bullish tendency, and we have a large number of Fed Day studies to refer. For those that are unaware, a Fed Day is simply a day where the Federal Reserve completes a scheduled meeting and provides a policy announcement. Meetings typically take place 8 times
- 1 month ago, 28 Jan 2019, 12:06am -
Compound Your Knowledge: Episode 2-ESOPs, Factors, Incentives [Alpha Architect]
In today’s video, we examine three posts. First, we examine ESOPs and 1042 QRP (qualified replacement property) with Doug Pugliese. Second, we examine a guest post by Nicolas Rabener examining Value, Momentum and Carry over the past 10 years. Last, we examine a guest post by Elisabetta discussing
- 1 month ago, 28 Jan 2019, 12:06am -
Right Now It’s KDA…Asset Allocation [QuantStrat TradeR]
This post will introduce KDA Asset Allocation. KDA — I.E. Kipnis Defensive Adaptive Asset Allocation is a combination of Wouter Keller’s and TrendXplorer’s Defensive Asset Allocation, along with ReSolve Asset Management’s Adaptive Asset Allocation. This is an asset allocation strategy with a
- 2 months ago, 24 Jan 2019, 09:44pm -
Algorithmically Detecting (and Trading) Technical Chart Patterns with Python [Alpaca]
Defining Technical Chart Patterns Programmatically Ever wondered how to programmatically define technical patterns in price data? At the fundamental level, technical patterns come from local minimum and maximum points in price. From there, the technical patterns may be defined by relative
- 2 months ago, 24 Jan 2019, 09:43pm -
The Stay Rich Portfolio (or, How to Add 2% Yield to Your Savings Account) [Meb Faber]
In 2012, Eike Batista had an estimated worth of more than $35 billion. The self-made Brazilian billionaire created an empire that stretched from mining to oil to public works. Many considered him the pride of Brazil. Barely two years later, he had lost all $35 billion…and owed another $1.2 billion
- 2 months ago, 24 Jan 2019, 01:52pm -
Asset Allocation Roundup [Allocate Smartly]
Six recent asset allocation articles (tactical or otherwise) that you might have missed: 1. Fragility Case Study: Dual Momentum GEM (Newfound) + Response from Gary Antonacci Corey’s post kicked off quite a lively discussion. I encourage you to click through to both pieces, but here’s the
- 2 months ago, 23 Jan 2019, 01:25pm -
The Efficient Market Hypothesis [Highly Evolved Vol]
(This is an excerpt from my upcoming book on positional option trading.) The traders’ concept of the Efficient Market Hypothesis (EMH) is, “making money is hard”. This isn’t wrong, but it is worth looking at the theory in more detail. Traders are trying to make money from the exceptions to
- 2 months ago, 23 Jan 2019, 01:24pm -
Rankings and Risk-Taking in the Finance Industry [Alpha Architect]
Rankings are everywhere in the finance industry. A number of papers identify bonus schemes and tournament incentives(1) among the main drivers of excessive risk-taking in developed financial markets. The article studies the impact of rankings on professionals’ risk-taking investment decisions.
- 2 months ago, 23 Jan 2019, 10:41am -
Drawdowns and Portfolio Longevity [Flirting with Models]
While retirement planning is often performed with Monte Carlo simulations, investors only experience a single path. Large or prolonged drawdowns early in retirement can have a significant impact upon the probability of success. We explore this idea by simulation returns of a 60/40 portfolio and
- 2 months ago, 22 Jan 2019, 11:09am -
Corporate Debt In The Chinese Stock Market [Factor Research]
China exhibits the world’s highest corporate debt as % of GDP However, Chinese stocks are not significantly more levered than U.S. stocks Asset and debt growth has stalled in 2018, likely indicating an economic slowdown INTRODUCTION The McKinsey Global Institute published an influential study in
- 2 months ago, 22 Jan 2019, 11:09am -
Drawdown control [SR SV]
Containment of drawdowns and optimization of performance ratios for multi-asset portfolios is critical for trading strategies. Alas, short data series or structural changes often render estimates of covariance matrices unreliable. A popular solution is risk-parity with volatility targeting. An
- 2 months ago, 19 Jan 2019, 10:47am -
Software engineering is as important as data science [Cuemacro]
I end up tweeting a lot. Possibly, far too much of what I tweet is random, about burgers and so on, albeit with a modicum of tweets about markets and Python. Twitter inevitably acts like some sponge, absorbing your attention, which can often be a bad thing, but can actually also be a good thing. A
- 2 months ago, 19 Jan 2019, 10:46am -
Jack Bogle: The apostle of index investing [Mathematical Investor]
Jack Bogle, founder of Vanguard Funds and a life-long apostle of index investing, died on 16 January 2019. Vanguard CEO Tim Buckley summarized his career in these terms: “Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless
- 2 months ago, 18 Jan 2019, 10:02pm -
Buyback Blackout Periods Do Not Negatively Impact Market Performance [Alpha Architect]
The October 2018 market correction where the S&P 500® Index fell by 7%, its worst October since 2008,(1) left investors searching for a culprit. Some of the usual suspects were blamed — rising geopolitical tensions ahead of the US midterms, the high likelihood of a slowdown in economic and
- 2 months ago, 18 Jan 2019, 11:32am -
Compound Your Knowledge: Episode 1 [Alpha Architect]
Welcome to the newly re-titled weekly video, Compound Your Knowledge. In today’s video, we examine three posts. First, we examine a simple analysis of 2018 Factor portfolio returns. Second, we examine a guest post by Jon Seed examining Warren’s put options, and how they are different than most
- 2 months ago, 18 Jan 2019, 11:32am -
Whither Fragility? Dual Momentum GEM [Dual Momentum]
Corey Hoffstein of Newfound Research recently wrote an article called, “Fragility Case Study: Dual Momentum GEM.” Corey starts out saying my dual momentum approach is the strategy he sees implemented the most among do-it-yourself tactical investors. Corey then said several investors bemoaned
- 2 months ago, 18 Jan 2019, 10:57am -
Livingston's Muscular Portfolios [Allocate Smartly]
This is a test of two tactical asset allocation strategies from Brian Livingston’s new book Muscular Portfolios and his site MuscularPortfolios.com: the “Mama Bear” and “Papa Bear” Portfolios. The short and sweet take: neither of these strategies tread new ground – they’re both based
- 2 months ago, 17 Jan 2019, 11:45am -
Historical View Of Extreme Short-Term Gains In $OEX Components [Quantifiable Edges]
As I write this around 11am EST both NFLX and CELG are threatening to close up > 50% from their December 24th closing price, just 14 trading days ago. While that sometimes happens with speculative smallcap stocks, it is very unusual to see a largecap S&P 100 stock accomplish such strong gains
- 2 months ago, 16 Jan 2019, 11:07am -
Factor investing in the currency market [Quant Dare]
Factor investing is a broadly used approach in asset management, specially for the equity market, but, can we apply this idea in order to explain currency returns? The idea at the core of factor investing is that there are different sources of risk in the market and that the exposure of the
- 2 months ago, 16 Jan 2019, 11:07am -
Quarterly Analysis and Commentary: Q4 2018 [Alpha Architect]
We’ve posted our quarterly attribution materials on our performance site.(1) We enjoyed putting the materials together and think they will be informative for those who follow our Indexes. The materials and videos are part of our long-term plan is to continually improve our quarterly communications
- 2 months ago, 16 Jan 2019, 11:06am -
Harvesting Risk Premia [Robot Wealth]
Trading and investing doesn’t have to be complicated. Check out this chart: source: Dimson, Marsh and Staunton, Triumph of the Optimists The blue line shows returns from US Stocks from 1900 to today. That’s a 48,000x increase in nominal value. The yellow line shows returns from US Bonds from
- 2 months ago, 15 Jan 2019, 09:22am -
The Most Volatile Stock Markets in the World [Quant Rocket]
Many quantitative trading strategies thrive in high volatility regimes, while other trading strategies work best in low volatility regimes. So which global markets are the most and least volatile? This post compares the daily, overnight, and intraday volatility of 17 countries. Methodology Using
- 2 months ago, 15 Jan 2019, 09:21am -
Equity investing is Riskier than You Probably Expected [Alpha Architect]
The purpose of this study was to examine the changes in the distribution of the US equity risk premium as the return horizon varies from monthly, annually, 3 year, 5 year, 10 year, 20 and 30 year periods. The equity premium was calculated as the monthly difference between the Market and Treasury
- 2 months ago, 15 Jan 2019, 09:20am -
Fragility Case Study: Dual Momentum GEM [Flirting with Models]
Recent market volatility has caused many tactical models to make sudden and significant changes in their allocation profiles. Periods such as Q4 2018 highlight model specification risk: the sensitivity of a strategy’s performance to specific implementation decisions. We explore this idea with a
- 2 months ago, 14 Jan 2019, 09:28am -
ESG Investing: Too Good To Be True? [Factor Research]
ESG factors generated positive excess returns since 2009 Show positive exposure to Low Volatility & Quality and negative exposure to Value & Size Factor exposure is likely structural and not temporary INTRODUCTION BlackRock is aggressively launching products with high environmental, social,
- 2 months ago, 14 Jan 2019, 09:28am -
Most popular posts – 2018 [Eran Raviv]
2019 is well underway. 2018 was personally difficult, so I am happy it’s behind us. Without further ado, here is what my analytics report shows to be the three most popular posts for 2018: – Create own Recession Indicator using Mixture Models (3:53 minutes average time on page) – Portfolio
- 2 months ago, 13 Jan 2019, 09:24pm -
Quandl's Third Annual Data Conference - Feb 28th, New York City [Quandl]
Quandl, the leading platform for financial and alternative data, will host its third annual Quandl Data Conference (formerly the Alternative Data Conference) on February 28, 2019, at Convene’s 46th St. location in New York City. “We launched this event nearly three years ago to create awareness
- 2 months ago, 12 Jan 2019, 01:01pm -
January Opex Weak [Quantifiable Edges]
Opex week overall has typically been a bullish part of the month for the market. But over the last 20 years, January has been a major exception to this rule. The table below shows results of buying the Friday before options expiration week in January and then selling at the close of option
- 2 months ago, 12 Jan 2019, 09:55am -
Where to find free data for markets [Cuemacro]
If you do any sort of analysis of markets, you need market data and related datasets. Without data, you are kind of stuck! There are of course many market datasets which are available to purchase from data vendors. However, what type of datasets are available for free (aside from crypto markets,
- 2 months ago, 12 Jan 2019, 09:55am -
Liquidity yields and FX [SR SV]
Liquidity yields are convenience yields of financial securities that typically arise from high liquidity, suitability as collateral or preferred regulatory status. New research argues that relative changes in liquidity yields on government bonds across countries have a significant impact on exchange
- 2 months ago, 12 Jan 2019, 09:54am -
A Universal Stock Screening Application [Jonathan Kinlay]
- 2 months ago, 11 Jan 2019, 09:56am -
Pump-and-Dump Participation/Losses [CXO Advisory]
A “pump-and-dump” scheme promoter: (1) builds a position in a stock (often a thinly traded penny stock); (2) gooses its price by spreading misleading information; and, (3) liquidates the position once the stock reaches. Who responds to such schemes and what are their returns? In the December
- 2 months ago, 11 Jan 2019, 09:56am -
How Bad Was 2018’s Volatility? [Alvarez Quant Trading]
I have a Google Home in my bathroom that I play a morning routine while I shave, brush my teeth and get ready for the day. One step is to play The Indicator podcast from Planet Money. This morning they were talking about how “2018 was one of the most volatile years on record for the stock
- 2 months ago, 9 Jan 2019, 01:23pm -
Omega ratio, the ultimate risk-reward ratio? [Quant Dare]
If you are working in finance, you have almost surely heard of risk-reward ratios and probably used some of them to evaluate the performance of a stock, ETF, or any other investment strategy. Among the different alternatives, the most popular risk-reward ratio is the so-called Sharpe ratio, first
- 2 months ago, 9 Jan 2019, 01:23pm -
Payday Anomaly Revisited [Alpha Architect]
Unless you are a die-hard buy-and-hold investor, chances are that you need to rebalance your portfolio at some point. The question is when? And how often? And why at a specific time? Some strategies rebalance once a year, some multiple times a day. What if there were better times to rebalance? Last
- 2 months ago, 8 Jan 2019, 01:18pm -
Ranking The Current US Stock Market Drawdown vs. History [Capital Spectator]
It’s anyone’s guess if the recent rebound in US equities will soon push the S&P 500 Index to a new high. What we do know is that the market has staged a solid bounce so far. For the eight trading days since Christmas Eve’s close, when the S&P’s current drawdown hit bottom, the index
- 2 months ago, 8 Jan 2019, 10:13am -
Rare Zweig Breadth Thrust Signal Suggests Bullish Implications [Quantifiable Edges]
The strong breadth we have seen recently has caused the 10-day exponential moving average of the NYSE Up Issues % to rise up to 62%. A move through 61.5% after being below 40% within the last 2 weeks is considered a Zweig Breadth Thrust trigger. This is a signal created by Martin Zweig. Over the
- 2 months ago, 8 Jan 2019, 10:13am -
Video Digest: Process & Manager Diversification [Flirting with Models]
- 2 months ago, 8 Jan 2019, 10:13am -
Herding and Mutual Fund Performance [Alpha Architect]
What are the Research Questions? Can investors identify skilled and unskilled mutual fund managers by observing their tendency to herd? Do differences in herding behavior across funds predict mutual fund performance? Does skill drives the link between herding and future performance? Does herding
- 2 months ago, 8 Jan 2019, 10:13am -