Quant Mashup
Compound Your Knowledge Episode 7: Momentum & Short Sellers [Alpha Architect]
In today’s video, we examine three articles from last week. The first article, written by Larry Swedroe, examines the Momentum of News. The second article, written by Wes, examines an out-of-sample test on Momentum by looking at Russian stocks in the 19th century. The third article, written by
- 1 month ago, 8 Apr 2019, 11:09pm -
Revisiting The Weird Portfolio [Flirting with Models]
A few years ago, we blindly applied mean-variance optimization to a set of capital market assumptions, and The Weird Portfolio was born. This portfolio is weird because it does not look like typical investor portfolios since it tilts heavily toward credit-based and alternative asset classes. Despite
- 1 month ago, 8 Apr 2019, 09:58am -
Multi-Factor Smart Beta ETFs [Factor Research]
Investors have leaned towards multi-factor over single-factor products in recent years The factor selection and portfolio construction of multi-factor ETFs can be challenged Multi-factor ETFs often feature factors, such as growth, which are not supported by academic research while lacking exposure
- 1 month ago, 8 Apr 2019, 09:57am -
The most overlooked aspect of algorithmic trading [EP Chan]
Many algorithmic traders justifiably worship the legends of our industry, people like Jim Simons, David Shaw, or Peter Muller, but there is one aspect of their greatness most traders have overlooked. They have built their businesses and vast wealth not just by sitting in front of their trading
- 1 month ago, 5 Apr 2019, 11:40am -
A Simple Mean Reversion Stock Trading Script in C# [Trevor Thackston]
Python is not the only language In the past, I’ve published stories on Medium showing how to write algorithms that trade stocks based on company fundamentals and how to run a technical analysis day trading algorithm in the cloud. Both of those articles assumed that: Python was the language the
- 1 month ago, 5 Apr 2019, 11:40am -
Low Volume At Highs Does Not Provide The Short-Term Bearish Edge It Once Did [Quantifiable Edges]
Years ago, strong overbought readings during an uptrend were easily sold – especially when volume came in very light. But that has not held true in recent years. There were several studies I examined last night that noted the low volume, but they have all lost their edge over the last several
- 1 month ago, 5 Apr 2019, 11:38am -
Tests of Constant and Variable Acceleration Model Kalman Filters [Dekalog Blog]
In my last post I said that this next post would report the results of tests on a Constant Acceleration model Kalman filter, and the results are: fail, just like the Constant Velocity model, so I won't bore readers with reporting the details of the failed tests. However, tests of a Variable
- 1 month ago, 5 Apr 2019, 11:38am -
State of Trend Following in March [Au Tra Sy]
Slightly negative result for the State of Trend Following last month, leaving the YTD number in slight positive territory. Please check below for more details. Detailed Results The figures for the month are: March return: -0.22% YTD return: 2.55% Below is the chart displaying individual system
- 1 month ago, 5 Apr 2019, 11:38am -
The Momentum of News [Alpha Architect]
Since the development of the capital asset pricing model (CAPM) in the 1960s, hundreds of anomalies (what John Cochrane famously called a “zoo of new factors”) have been uncovered in the cross-section of stock returns. While some of the anomalies (such as the size and value factors) have
- 1 month ago, 4 Apr 2019, 03:09pm -
Wisdom State of Trend Following - March 2019 [Wisdom Trading]
Please find this month’s report of the Wisdom State of Trend Following. Performance is hypothetical. Chart for March: The chart for the first quarter: And the 12-month chart: Below are the summary stats: Horizon Return Ann. Vol. Last month 1.49% 12.99% Year To Date -6.21% 12.56% Last 12 months
- 1 month ago, 4 Apr 2019, 03:09pm -
Mutual Fund Investors Irrationally Naive? [CXO Advisory]
Do retail investors rationally account for risks as modeled in academic research when choosing actively managed equity mutual funds? In their March 2019 paper entitled “What Do Mutual Fund Investors Really Care About?”, Itzhak Ben-David, Jiacui Li, Andrea Rossi and Yang Song investigate whether
- 1 month ago, 4 Apr 2019, 03:08pm -
Global Equity Momentum: A Craftsman's Perspective - Executive Summary [Invest ReSolve]
Quantitative investment researchers often seek uniquely optimal parameterizations of their strategies amongst a broad “robust” region of parameter choices. However, this ignores a critically important feature of investing – Diversification. By diversifying across many equally legitimate
- 1 month ago, 3 Apr 2019, 12:50pm -
The 50/50 SPY Strategy [Alvarez Quant Trading]
I was talking to my trading buddy about the annoying part of trend following strategies. They may get you out of the major sell off but then you miss part of the run up. Using a 200-day moving average on the SPY would have got you out in late 2018. This would have been within 10% from the top and
- 1 month ago, 3 Apr 2019, 12:50pm -
Understanding the shape of data (II) [Quant Dare]
Topology could be used to gain insight on the shape of our data, as we explained in our last post. Today, we will put this theory into practice by analyzing the 2008 financial crisis. Persistence diagrams We will start by giving an equivalent representation of the persistence barcode that we saw
- 1 month ago, 3 Apr 2019, 12:50pm -
Coming soon: The Quant Conference - April 12th in New York City
The rise of big data, application of machine learning and other technological developments in recent years have transformed the quantitative finance industry, and The Quant Conference has been conceived as a unique event to provide an educational forum for delegates to hear about current trends in
- 1 month ago, 2 Apr 2019, 01:25pm -
Over 90 Years of Golden Crosses (and a look at past drawdowns) [Quantifiable Edges]
The SPX made a Golden Cross formation on Monday. A Golden Cross occurs when the 50ma crosses over the 200ma. Having the 50ma above the 200ma is commonly considered a bullish market condition – and generally it is. I used my Norgate data and Amibroker software to look back as far as 12/31/1928.
- 1 month ago, 2 Apr 2019, 09:37am -
Intro to Hidden Markov Chains [Quant Insti]
In a situation where you wish to determine the returns on investment, one may have all the expertise to do this but without certain information (missing pieces) it would not be possible to derive to a conclusive figure. In practical terms “assume you have the value of all returns of all assets in
- 1 month ago, 2 Apr 2019, 09:37am -
Tactical Asset Allocation in March [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, 1 Apr 2019, 01:05pm -
Short Selling + Insider Selling = Bad News [Alpha Architect]
What are the research questions? Is there a relationship between short selling activity and insider selling? What is the impact of short selling trading strategies that are conditioned on insider trading signals? Does the price impact of short selling subsume that of insider trading? Is the price
- 1 month ago, 1 Apr 2019, 01:04pm -
Inverted Yield Curve: Danger or Noise? [Two Centuries Investments]
In addition to market valuation ratios like CAPE, the slope of the yield curve is one of the most talked about signals used to estimate future recessions and market returns. During the second half of last month (March 2019), the yield curve has inverted by about 5 basis points with the 10-year rate
- 1 month ago, 1 Apr 2019, 09:41am -
Taxes and Trend Equity [Flirting with Models]
Due to their highly active nature, trend following strategies are generally assumed to be tax inefficient. Through the lens of a simple trend equity strategy, we explore this assertion to see what the actual profile of capital gains has looked like historically. While a strategic allocation may only
- 1 month ago, 1 Apr 2019, 09:41am -
Test of Constant Velocity Model Kalman Filter [Dekalog Blog]
Following on from my previous post, this post is a more detailed description of the testing methodology to test kinematic motion models on financial time series. The rationale behind the test(s) which are described below is different from the usual backtesting in that the test(s) are to determine
- 1 month ago, 1 Apr 2019, 09:40am -
Factor Olympics Q1 2019 [Factor Research]
2019 has started favorable for factor investors, compared to 2018 Low Volatility generated the best and Value the worst performance Factor performance is comparable in the US & Europe, but different in Japan INTRODUCTION We present the performance of five well-known factors on an annual basis
- 1 month ago, 1 Apr 2019, 09:40am -
Noisy Data strategy testing [Philipp Kahler]
Algorithmic trading adds noise to the markets we have known. So why not add some noise to your historic market data? This way you can check if your algorithmic trading strategies are fit for the future. Learn how to generate noisy data and how to test your strategies for stability in a noisy market.
- 1 month ago, 30 Mar 2019, 08:53am -
Survival in the trading factor zoo [SR SV]
The algorithmic strategy business likes quoting academic research to support specific trading factors, particularly in the equity space. Unfortunately, the rules of conventional academic success provide strong incentives for data mining and presenting ‘significant’ results. This greases the
- 1 month ago, 30 Mar 2019, 08:53am -
Differences Between the VIX Index And At-the-Money Implied Volatility [Relative Value Arbitrage]
When trading options, we often use the VIX index as a measure of volatility to help enter and manage positions. This works most of the time. However, there exist some differences between the VIX index and at-the-money implied volatility (ATM IV). In this post, we are going to show such a difference
- 1 month ago, 28 Mar 2019, 09:51pm -
An End of Quarter Edge [Quantifiable Edges]
It is worth noting that Friday is the last trading day of the quarter. And the last day of the quarter has some interesting characteristics. I often hear the term “window dressing” mentioned by the media when referring to end of quarter activity. The suggestion is that fund managers will make
- 1 month ago, 28 Mar 2019, 09:50pm -
Pitfalls When Assessing Market-Timing Strategies [Alpha Architect]
Consider a market-timing strategy which supposedly predicts the direction of the stock market trend. Such a strategy generates Buy and Sell signals. A Buy signal is the signal to buy stocks, whereas a Sell signal is the signal to sell. Simple enough, but how does one evaluate the forecast accuracy
- 1 month ago, 27 Mar 2019, 12:59pm -
Risk targeting and dynamic asset allocation: absolute or relative momentum? [Investment Idiocy]
Quite a few of my recent blog pieces have been picked up by the lovely folk at allocate smartly. So I thought I'd write an asset allocation piece, as the readers of my second book "Smart Portfolios" probably feel neglected with the lack of articles on investment rather than trading.
- 1 month ago, 27 Mar 2019, 12:59pm -
Fundamental Manifoldness [Quant Dare]
One of the hardest and most frequent tasks for anyone in the quantitative finance world is to summarize or visualize in a simple way a vast amount of data to represent a company. In this blog, we have covered different Machine Learning techniques that allow us to summarize information through
- 1 month ago, 27 Mar 2019, 12:58pm -
AI and Alternative Data in Investing - Hype or Reality? [Two Centuries Investments]
Having just attended a great AI conference in New York, here are some observations: First about AI Most quants prefer the term Machine Learning (ML) instead of AI. Questions still remain of where AI (ML) adds value in a quant investment process. For example, Man’s CIO Sandy Rattray said that it
- 2 months ago, 25 Mar 2019, 09:28am -
Time Dilation [Flirting with Models]
Information does not flow into the market at a constant frequency or with constant magnitude. By sampling data using a constant time horizon (e.g. “200-day simple moving average”), we may over-sample during calm market environments and under-sample in chaotic ones. As an example, we introduce a
- 2 months ago, 25 Mar 2019, 09:28am -
Seasonality May Again Flip This Week…To Bullish [Quantifiable Edges]
With regards to seasonality, we are in an interesting period right now. The last couple of weeks the market played out well according to seasonal patterns. We saw March opex week put in nice gains as it often does. And then we saw the week after Quad-witching suffer losses this past week.
- 2 months ago, 25 Mar 2019, 09:27am -
Black Swans, Major Events and Factor Returns [Factor Research]
It is questionable if investors should prepare for catastrophic events Factor returns are almost random after black swan and major events Simple diversification is likely the best option for the expected and unexpected INTRODUCTION Investors fear black swan events, although it can be argued that
- 2 months ago, 25 Mar 2019, 09:27am -
Signaling systemic risk [SR SV]
Systemic financial crises arise when vulnerable financial systems meet adverse shocks. A systemic risk indicator tracks the vulnerability rather than the shocks (which are the subject of ‘stress indicators’). A systemic risk indicator is by nature slow-moving and should signal elevated
- 2 months ago, 25 Mar 2019, 09:27am -
Does Meta Labeling Add to Signal Efficacy? [Quants Portal]
This weeks research was consumed by the concept of Meta-Labeling, how it works, and does it work out-of-sample? We have published a research report as well as an accompanying slide show. There was quite a bit of discussion this on the topic, the following is a link to a Github issue where a few
- 2 months ago, 21 Mar 2019, 09:04am -
Why the Size Premium Should Persist w/ @LarrySwedroe [Alpha Architect]
As the chief research officer for Buckingham Strategic Wealth and The BAM Alliance, I’m often asked, after any asset class or factor experiences a period of poor performance, if the historical outperformance of stocks with that characteristic has disappeared because the premium has become well
- 2 months ago, 21 Mar 2019, 09:03am -
Revisiting the Kalman Filter [Dekalog Blog]
Some time ago ( here, here and here ) I posted about the Kalman filter and recently I have been looking at Kalman filters again because of this Trend Without Hiccups paper hosted at SSRN. I also came across this Estimation Lecture paper which provides MATLAB code for the testing of Kalman filters
- 2 months ago, 21 Mar 2019, 09:02am -
Asset Allocation Roundup [Allocate Smartly]
Five recent asset allocation articles (tactical or otherwise) that you might have missed: 1. ETF Bond Rotation (Alvarez Quant Trading) Cesar looks at different flavors of a simple momentum-based bond rotation strategy. Using momentum to time bond asset classes has not worked nearly as well as it has
- 2 months ago, 20 Mar 2019, 09:12am -
Generating Financial Series with Generative Adversarial Networks [Quant Dare]
The scarcity of historical financial data has been a huge hindrance for the development of algorithmic trading models ever since the first models were devised. In the ever-changing economic reality we live in, countless models are tried and evaluated. Most of these models seek to extract information
- 2 months ago, 20 Mar 2019, 09:11am -
Hedging Long-Term Risk with an Intraday Strategy [Quant Rocket]
Do intraday strategies have a place in the portfolios of long-term investors and fund managers? This post explores an intraday strategy that works best in high volatility regimes and thus makes an attractive candidate for hedging long-term portfolio risk. Trading hypothesis: first half hour predicts
- 2 months ago, 20 Mar 2019, 09:11am -
Fractional Differencing Implementation (FD Part 3) [Kid Quant]
Well...That took a lot longer than I expected it too. 6 weeks later and I finally have the last installation in these series of posts. It's also the longest one so you could say it was worth the wait. I recently found out that Python 2.7 (the python I've used for EVERY project) will soon
- 2 months ago, 19 Mar 2019, 09:41am -
Using Dynamic Mode Decomposition (DMD) to Rotate Long-Short Exposure Between Market Sectors [Quantoisseur]
Part 1 – Theoretical Background The Dynamic Mode Decomposition (DMD) was originally developed for its application in fluid dynamics where it could decompose complex flows into simpler low-rank spatio-temporal features. The power of this method lies in the fact that it does not depend on any
- 2 months ago, 19 Mar 2019, 09:41am -
Monte Carlo Simulation of strategy returns [Philipp Kahler]
Monte Carlo Simulation uses the historic returns of your trading strategy to generate scenarios for future strategy returns. It provides a visual approach to volatility and can overcome limitations of other statistical methods. Monte Carlo Simulation Monte Carlo is the synonymous for a random
- 2 months ago, 19 Mar 2019, 09:40am -
Trend Following in Cash Balance Plans [Flirting with Models]
Cash balance plans are retirement plans that allow participants to save higher amounts than in traditional 401(k)s and IRAs and are quickly becoming more prevalent as an attractive alternative to defined benefit retirement plans. The unique goals of these plans (specified contributions and growth
- 2 months ago, 18 Mar 2019, 09:21am -
Smart Beta Asset Allocation Models [Factor Research]
Most smart beta strategies outperformed the market since 1990, but few have in recent years Diversifying across strategies mitigates the risk of underperformance Various asset allocation models for creating multi-factor portfolios highlight similar results INTRODUCTION The appearance of smart beta
- 2 months ago, 18 Mar 2019, 09:21am -
10 Ways to Combine Quant and Fundamental Approaches that Work (and 10 that don't) [Two Centuries Investments]
Can quantitative and fundamental approaches be successfully combined? In my estimate, this has been a top 5 industry question for a long time, including this conference at which I’ll be speaking at tomorrow The short answer is: Yes More-so, I believe quantitative approaches cannot work without
- 2 months ago, 18 Mar 2019, 09:20am -
How to collect market tick data [Cuemacro]
A lunch break is probably more of a necessity from a break perspective than anything else. You could make the “break” aspect as short as possible, by getting a ready made takeaway. However, that kind of negates the whole break aspect of it all. I end up going through various cycles of what I
- 2 months ago, 18 Mar 2019, 09:20am -
How to estimate risk in extreme market situations [SR SV]
Estimating portfolio risk in extreme situations means answering two questions: First, has the market entered an extreme state? Second, how are returns likely to be distributed in such an extreme state? There are three different types of models to address these questions statistically. Conventional
- 2 months ago, 18 Mar 2019, 09:20am -
Day of the week and the cross-section of returns [Eran Raviv]
I just finished reading an interesting paper by Justin Birru titled: “Day of the week and the cross-section of returns” (reference below). The story is much too simple to be true, but it looks to be so. In fact, I would probably altogether skip it without the highly ranked Journal of Financial
- 2 months ago, 15 Mar 2019, 11:57am -