We are looking for 3-4 traders (or trading teams) to showcase as Strategy Managers on our Algorithmic Trading Platform. Ideally these would be systematic quant traders, since that is the focus of our fund (although they don’t have to be). So far the platform offers a total of 10 strategies in

Often a Quantitative Researcher will develop trading models in Python or R. These models are then passed off to Quantitative Developers, who implement them in trading systems with Java or C++. Usually, a Quantitative Trader will then execute trades with the help of these systems. I have had the

The carry factor is the tendency for higher-yielding assets to provide higher returns than lower-yielding assets — it is a cousin to the value factor, which is the tendency for relatively cheap assets to outperform relatively expensive ones. A simplified description of carry is the return an

It has been a busy few months. I have been exploring market indicators that John Ehlers has created which he publicly made available in his book: Cycle Analytics for Traders : Advanced Technical Trading Concepts. The key theme of his book is applying digital signal processing filters to better

This post is the first of a series where we will be providing some of our own thoughts and commentary the conversations we had in the first season of our new podcast. This post covers our conversation with Meb Faber, which you can listen to here. 2:09 - Meb hijacks the show to ask a very important

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so. — attributed to Mark Twain. Mark Twain had some great insights. The quote above can apply to just about every aspect of life, including investing. This axiom is particularly relevant

July 2018 Trend Following: DOWN -1.98% / YTD: -7.85% Please find this month’s report of the Wisdom State of Trend Following. Performance is hypothetical. Chart for July: Wisdom State of Trend Following - July 2018 And the 12-month chart: Wisdom State of Trend Following 12 months - July 2018 Below

Slightly positive month for the State of Trend Following, with the YTD slightly negative. Please check below for more details. Detailed Results The figures for the month are: July return: 0.57% YTD return: -2.19% Below is the chart displaying individual system results throughout July: StateTF July

In July 2016, we argued that bond investors should be quick to celebrate the strong returns they had realized year-to-date. The combination of a defined maturity and known coupon rate creates a gravitational pull for bond returns. Using a global bond ETF universe, we develop a simple model to

The simplicity of the Momentum factor can be intellectually challenging Various alternative Momentum versions highlight remarkable similar return profiles The robustness is an attractive characteristic of the investment strategy INTRODUCTION What do selfies, the Kardashians, Crocs, blue cheese, and

While the literature on gold is dominated by studies on its diversification, hedging, and safe haven properties, the question “When to invest in gold?” is generally not analyzed in much detail. We test more than 4,000 seasonal, technical, and fundamental timing strategies for gold. While we find

In their paper “The Probability of Backtest Overfitting” [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2326253] Bailey et al. introduce a method for detecting overfitting. They refer to the method as CSCV or Combinatorially Symmetric Cross Validation. Bailey et al. proceed to show that

Variance swaps are over-the-counter derivatives that exchange payments related to future realized price variance against fixed rates. Variance swaps help estimating term structures for variance risk premia, i.e. market premia for hedging against volatility risk based in the difference between

As we have noted in previous Mathematical Investor blogs (see this blog for instance), surprisingly few mutual funds beat their respective benchmark (typically some market index). Even fewer consistently beat their benchmarks year after year. A new report from S&P Dow Jones sheds light on this

As everyone who’s been invested for the last ten years knows, post-financial crisis stock returns have been incredible. The chart below highlights the total returns for the S&P 500 Index, the MSCI EAFE Index, the MSCI EEM Index, and the MSCI ACWI Index. The results are hypothetical results and

This is a summary of the recent performance of a wide range of excellent tactical asset allocation 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 are

While playing around with a 2 period RSI (Relative Strength Index) mean reversion strategy, I came up with a very simple rule change with a much larger impact on the results than expected. I doubled the compounded annual growth rate and cut the maximum drawdown in half. That never happens. In my

It’s been some time since I last posted so what better way to start than by quantifying and exploring a momentum strategy that was first introduced to me by the good guys at Quantpedia (www.quantpedia.com). If you haven’t heard of this site before, then I encourage you to check it out. For a

As the surge of boomer retirements continues, commentators have given new thought to what safe withdrawal rates are for retirement accounts. The topic is especially significant given two additional factors. First, retirement balances are shockingly low for boomers (Ghilarducci 2015)[1]. Second,

We prefer to think about diversification in a three-dimensional framework: what, how, and when. The “how” axis covers the process with which an investment decision is made. There are a number of models that trend-followers might use to capture a trend. For example, trend-followers might employ a

Most factor investing research is based on long-short stock portfolios Investible risk premia strategies often feature a short index position Trade-off between theoretical alpha and implementation costs & efficiency INTRODUCTION Amundi, a French asset manager, was the first institution to launch

Coined by Rosenthal in 1979, the term file drawer problem refers to the notion that journal editors are biased toward accepting articles that include statistically significant results over those with nonsignificant results. The competition for increasing the citation count and improving journal

Quantpedia contacted me a few months ago and asked if I’d be interested in reviewing their site on my blog. I’m always looking for new ideas for trading systems, so I said “sure!” (Disclosure: they provided me with free account access during the review period.) Quantpedia.com is an

The leverage aversion theory implies that returns to the betting-against-beta (BAB) strategy are predictable by past market returns: An outward shift in investors' aggregate demand function simultaneously increases market prices and increases the expected future BAB return. I confirm the

I recently spotted the following intriguing paper: Market intraday momentum. From the abstract of that paper: Based on high frequency S&P 500 exchange-traded fund (ETF) data from 1993–2013, we show an intraday momentum pattern: the first half-hour return on the market as measured from the

Range forecasts are produced by estimating the parameters of a Geometric Brownian Motion process from historical data and using the model to project a large number of sample paths for the stock price over the coming month and year. For example, this is a range forecast for Netflix, Inc. (NFLX) as at

The statistical term ‘fat tails’ refers to probability distributions with relatively high probability of extreme outcomes. Fat tails also imply strong influence of extreme observations on expected future risk. Alas, they are a plausible and common feature of financial markets. A summary article

This post is a follow-up to the previous one on a simple system for hedging long exposure during a market downturn. It was inspired by H. Krishnan’s book The Second Leg Down, in which he referred to an interesting research paper [1] on the power-law behaviour of the equity indices. The paper

Factor investing research has a long storied past. Fama and French’s 1992 and 1993 papers arguably put factor investing “on the map,” but truth be told, factor investing is an old topic with roots grounded in the so-called arbitrage pricing theory. We have a longer piece on the history of

After the market close on Wednesday, Facebook (FB) released earnings, and the news and future outlook was not viewed well. After closing at an all-time high on Wednesday, it traded down in excess of 25% in the after-hours. So it seems certain it will be opening Thursday with a sizable gap lower. I

This is a follow-up from my FB post last night. Traders that looked to take advantage of a possible bounce from today’s open have seen moderate gains so far today. So what are the chances FB continues to bounce over the next several days and weeks? I re-looked at the study from last night, and

It's easy to forget that virtually all asset classes we hold are priced in US dollar terms. Portfolio valuations are as impacted by the denominator (US dollars) as by the numerator (asset value) Commodity assets like oil and gold are highly (negatively) correlated to US dollar strength. Certain

Countless studies have demonstrated that incorporating feedback loops into life is beneficial. Want to improve at work; seek a mentor. Want to nix that slice; get a swing coach. Want to get in shape; find a trainer. Want to become a better surgeon; get a coach. When left to our own designs,

Portfolio optimization research can be challenging due to the plethora of factors that can influence results, making it hard to generalize results outside of the specific cases tested. That being said, building a robust portfolio optimization engine requires a diligent focus on estimation risk.

Asset allocation is a complex problem that can be solved using endless variations of different approaches that range from theoretical like Mean-Variance to heuristic like Minimum Correlation or even “tactical strategies.” Another challenge is defining an appropriate asset class universe which

Factor exposure analysis can be used to derive factor themes Smart beta ETFs offer relatively low factor exposure It is all about how factors are defined INTRODUCTION The Austrian energy drinks company Red Bull advertised for almost two decades that Red Bull “gives you wings” and improves a

How do you feel when you see the word “statistics”? Maybe you sense that it’s something you should be really good at, but aren’t. Maybe the word gives you a sense of dread, since you’ve started exploring its murky depths, but thrown your hands up in despair and given up – perhaps more

Options-implied volatility of U.S. equity prices is measured by the volatility index, VIX. Options-implied volatility of volatility is measured by the volatility-of-volatility index, VVIX. Importantly, these two are conceptually and empirically different sources of risk. Hence, there should also be

In the last article on Python backtesting, we looked at how to install the Zipline library and get a basic simulation going. But what we did not touch upon was how to get your own data hooked up. If you are reading this, there is a good chance that you take your backtesting and trading simulation

What are the research questions The presence of historical prices impacting future returns, i.e., momentum, has been well researched in the equity market, which we’ve covered here. We’ve also closely looked at momentum in bond markets here, here, and here. What the Bali, Subrahmanyam, & Wen

Vigilant Asset Allocation from Dr. Keller and JW Keuning is one of the most popular tactical asset allocation strategies that we track (click for the full list). The authors’ original paper includes multiple variations of the strategy, based on the number of assets held at any given time and how

This paper investigates whether Tether, a digital currency pegged to U.S. dollars, influences Bitcoin and other cryptocurrency prices during the recent boom. Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable

Key Takeaways: Traditional methods of validation and cross-validation are problematic for time series prediction problems The solution is to use a "walk-forward" approach which incorporates new information as it becomes available. This approach gives us a more realistic view of how

This post covers our conversation with Tobias Carlisle, which you can listen to here. 2:09 - Toby starts at the beginning: with school classes that included sheering sheep in Australia. Corey Hoffstein ("CH"): I was so taken aback by this introduction that I was totally caught off-guard. I

I fell in love with k-Nearest Neighbors algorithm at first sight, but it isn’t blind love. I have plenty of reasons to be mad about it. 1. It’s pretty intuitive and simple Given that all you need to do is to compare samples, the Nearest Neighbors (k-NN) algorithm is a perfect first step to

In HIMCO’s May 2018 Quantitative Insight, they publish a figure that suggests the optimal holding length of a momentum strategy is a function of the formation period. Specifically, the result suggests that the optimal holding period is one selected such that the formation period plus the holding

The chart below is from this weekend’s QE subscriber letter. It is one I have updated frequently the last few months. It looks at compound performance of two opposing strategies. The blue line represents a strategy that is invested in the market during weeks that the Fed’s SOMA account value

This is an important article for practitioners because it brings specific investing decisions that are often treated as afterthoughts, to the forefront in style-based investing. The authors propose that decisions made beyond the initial decision to invest in a style, such as value or momentum, are

Portfolios frequently contain stocks representing duplicate factor risks or insignificant weights An optimisation process focused on factor exposure can increase the portfolio efficiency Increasing or decreasing factor exposure requires a view on expected factor performance and risks INTRODUCTION

Most investors have heard the adage "Sell in May and go away" which reflects the common wisdom that markets perform less well during the summer months than during the winter. This anomaly is well described here. Many widely held beliefs go away, precisely because they're widely held