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

Momentum trading, buying winning assets and selling losing assets, is a most popular trading strategy. It relies on sluggish market adjustment, allowing the trader to follow best-informed investors before the more inert part of the market does. Herding simply means that market participants imitate

What are the research questions? China represents the world’s second largest stock market and a growing component of the world’s GDP. China also operates under peculiar political and economic environments relative to the market economies of the Western world. Because China is so unique, a

Are some types of cars attractive alternative investments? In their September 2018 paper entitled “My Kingdom for a Horse (or a Classic Car)”, Dries Laurs and Luc Renneboog investigate price determinants and investment performance of classic cars from veteran cars (built 1888-1907) through

For my retirement accounts, I like to trade ETF strategies that require little work. One strategy we have all seen is the SPY/TLT strategy. There are many flavors of this concept. Some pick the best one over the last N months. Then there are different ways of allocating a portion of the portfolio to

Candlestick chart patterns are one of the most widely known techniques that claim to “predict” the market direction inside technical analysis circles. The development of this technique goes back to 18th century Japan, and it’s attributed to a Japanese rice trader. It consists of finding

Marcos Lopez de Prado, a member of Mathematicians Against Fraudulent Financial and Investment Advice (MAFFIA), has been named “2019 Quant of the Year” by Journal of Portfolio Management. Here are some excerpts from their press release: The Journal of Portfolio Management (JPM) has named Marcos

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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,

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

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

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

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

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

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

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