Over the past decade there has been an increase in the amount of digital information that is available. In particular, there is now vasts amount of data that is available on social media platform such as twitter and Facebook that can be analysed to gain further insight and to establish sentiment

Thanks to Paul Teetor, getSymbols() can now import data from Alpha Vantage! This feature is part of the quantmod 0.4-11 release, and provides another another data source to avoid any Yahoo Finance API changes*. Alpha Vantage is a free web service that provides real-time and historical equity data.

Developer: Joseph Granville (On-Balance Volume); R. D. Donchian (Breakout Channels). Concept: Trading strategy based on price breakouts confirmed by OBV (On-Balance Volume) filters. Research Question: Can volume filters improve price breakouts? Specification: Table 1. Results: Figure 1-2. Trade

Those in the financial media have recently been writing multiple stories on a fascinating working paper, “Do Stocks Outperform Treasury Bills?” by Hendrik Bessembinder. We originally highlighted the paper on our blog in January. However, recent stories by those at the New York Times (here and

Trend prediction in financial markets is a very complex task, due to the fact that prices are inherently noisy, non-stationary, and deterministically chaotic. In recent years, studies have leveraged various machine learning algorithms to tackle this task. Leung, Chen, and Daouk (2001) used a

September 2017 Trend Following: DOWN -5.31% / YTD: -21.01% The Wisdom State of Trend Following index had a rough September, unfortunately following the trend of the last 18 months and going through the -20% mark for the year so far. With only 3 months to go, 2017 is shaping up to be a strong

Like all traders, I am always on the lookout for any new indicators better than the ones I am using. I have been using and promoting RSI2 since 2004 for mean reversion trading. I created the ConnorsRSI in 2012. Am I married to these indicators? No. If I find something ‘better’ I will drop them.

Landon Thomas Jr. recently wrote an article in the New York Times regarding our participation in the recent March for the Fallen Event. Landon’s article was well-written and provided a compelling narrative. However, much of the attention of the article was focused on Alpha Architect and my

This is the first in a two part series of articles written by Frank Smietana, an expert guest contributor to QuantStart. In this article Frank takes a look at how early-stage quantitative hedge fund managers can go about looking to secure their first institutional allocation of capital. Please be

We examine the ability of existing and new factor models to explain the comovements of G10-currency changes. Extant currency factors include the carry, volatility, value, and momentum factors. Using a new clustering technique, we find a clear two-block structure in currency comovements with the

2017 is on track for a good year for factor exposure as most factors are positive Quality, Growth, and Momentum are headed for the winners podium Value is negative across regions, giving up all of last year’s gains INTRODUCTION We present the performance of six well-known factors on an annual

Personal note: Sorry for the long delay from posting. I had a death in the family this summer, a big overseas family wedding, and I’ve been working on getting my newsletter released, which I’ll announce in a later post. Now, I’m back. I was thinking this morning that with the increasing talk

Title: VOLATILITY WISDOM OF SOCIAL MEDIA CROWDS Authors: Ahmet K. Karagozoglu and Frank J. Fabozzi Publication: Journal of Portfolio Management, Winter 2017 (version here) What are the research questions? Using raw tweets from Twitter and StockTwits (“Trader Mood Data” from PsychSignal) a

In an ideal world, all investors would outperform their benchmarks. In reality, outperformance is a zero-sum game: for one investor to outperform, another must underperform. If achieving outperformance with a certain strategy is perceived as being “easy,” enough investors will pursue that

urn of the month will often trigger some seasonal studies. The study below looks at performance after times that SPY has closed a month at the highest closing price of the month. 2017-10-02 image1 The numbers across the board are fairly compelling. Trades may want to keep this in mind as we enter

This is a summary of the recent performance of a wide range of excellent tactical asset allocation strategies. These strategies are sourced from books, academic papers, and other publications. While we don’t (yet) include every published TAA model, these strategies are broadly representative of

Robert Carver, author of Systematic Trading, has turned his attention to the thorny problem of portfolio construction. In Smart Portfolios: A Practical Guide to Building and Maintaining Intelligent Investment Portfolios (Harriman House, 2017) he deals with such topics as how to blend assets with

Traditionally, asset returns have been modeled using diffusion processes. Diffusion processes assume that the sample path of the process being modeled is continuous. However, empirical evidence suggests that there are jumps that occur in asset returns, such as those that occurred during the

This post will be about implementing and investigating the running Kelly Criterion — that is, a constantly adjusted Kelly Criterion that changes as a strategy realizes returns. For those not familiar with the Kelly Criterion, it’s the idea of adjusting a bet size to maximize a strategy’s long

This post is the continuation of the previous one on the riskiness of OTM vs. ATM short put options and the effect of leverage on the risk measures. In this installment we’re going to perform similar studies with the only exception that from inception until maturity the short options are

Some things in life are naturally made for each other. Some examples include the following: Peanut Butter and Jelly Starsky & Hutch Value and Momentum So my ears perked up when the idea of combining VIX levels and Trend Following started making the rounds on finance twitter. Like any geek, I was

Successful investing requires translating sound investment concepts into actual trading strategies. We study many of the implementation details that portfolio managers need to pay attention to; such choices range from portfolio construction to execution. While these kinds of decisions apply to any

Does Bitcoin behave like some other asset class? To investigate, we calculate daily and monthly return correlations between Bitcoin and each of 34 exchange-traded products encompassing eight used in “Simple Asset Class ETF Momentum Strategy ” (SACEMS), 24 considered in “SACEMS Portfolio-Asset

In this article series Imanol Pérez, a PhD researcher in Mathematics at Oxford University, and an expert guest contributor to QuantStart outlines the basics of high-frequency trading. In this article Imanol uses the theory of stochastic optimal control to optimally execute a large trade order. It

Calculating returns on a price series is one of the most basic calculations in finance, but it can become a headache when we want to do aggregations for weeks, months, years, etc. In python the Pandas library makes this aggregation is very easy to do, but if we don’t pay attention we could still

Note: this is Part two of a two-part article series. Please see article one here. Michael Edesess’ article, The Trend that is Ruining Finance Research, makes the case that financial research is flawed. In this two-part article series, weexamine the points that Edesess raised in some detail. His

SUMMARY It’s difficult to rationalise why there should be excess returns from high quality stocks The Quality factor needs to be constructed beta-neutral to achieve positive returns Exposure to the Quality factor is an attractive hedge for an equity-centric portfolio INTRODUCTION The concept of

The current return expectations for core U.S. equities and bonds paint a grim picture for the success of the 4% rule in retirement portfolios. While varying the allocation to equities throughout the retirement horizon can provide better results, employing tactical strategies to systematically

The benefits of country diversification are well established. This article shows that the same benefits extend to equity factors, such as value, size, momentum, investment, and profitability. Specifically, country factor portfolios reflect both common variation, which we define as the global factor,

Now that the Federal Reserve has begun the process of raising interest rates, and has announced their intention to begin to unwind their policy of quantitative easing (reducing the amount of bonds in their portfolio, either by selling holdings or allowing holdings to mature), investors may be

It has been about 5 months since my last blog post and in this time I have been working away from home, been on summer holiday and spent some time mucking about on boats, so I have not been able to devote as much time to my blog as I would have liked. However, that has now changed, and this blog

This is a test of the Trinity Portfolio from Meb Faber and Cambria Investments, so named for the three key elements of the strategy: (1) a globally diversified mix of assets, (2) a tilt towards the value and momentum factors, and (3) exposure to momentum and trend-following. We’ve titled our test

Why don’t machines rule the financial world? In his September 2017 presentation entitled “The 7 Reasons Most Machine Learning Funds Fail”, Marcos Lopez de Prado explores causes of the high failure rate of quantitative finance firms, particularly those employing machine learning. He then

We are back again with another post on Python. Our last post, “Basic Operations on Stock data using Python” was well received and we are glad to see the number of likes & shares for the post on various quant trading and Python forums. Keep them coming! Financial market data is a very

I recently gave a presentation on Sector trading using the 200-day moving average at the Northwest Traders and Technical Analysts. Some questions asked were: What if we only trade this monthly? What if we used weekly bars to trade only weekly? Wat if we used weekly bars to trade monthly? The reason

Motivation Support Vector Machines (SVM) are among the most popular Supervised Learning techniques for classification and regression, due to their ease in usage to find non-linear patterns. They work by separating data by finding an optimal threshold – known as a decision boundary or hyperplane,

Michael Edesses’ article, “The Trend that is Ruining Finance Research” makes the case that financial research is flawed. In this two-part article series, we will examine the points that Michael raises in some detail. We find his arguments have some merit. Importantly however, his article fails

Equal-weight and volatility-weighted allocations are two common factor allocation frameworks Risk-return ratios are not higher with volatility-weighted allocations Different reasons can explain the superiority of equal-weight allocations INTRODUCTION In July we published a research report “Factors

Averages are often used to summarize data: but sometimes fitting for the average means fitting nothing at all. Expected returns are a meaningful input to portfolio construction, but are unlikely to be the returns actually realized. Reality rarely looks average. The world is dynamic and forecasts can

Asset Allocation in a Low Yield Environment John Huss (AQR Capital Mgt.), et al. August 17, 2017 The year 2016 saw bond yields fall to unprecedented low levels in major developed markets, with nominal yields on 10-year German and Japanese government bonds even turning negative. While yields have

From a seasonality standpoint, there isn’t a more reliable time of the year to have a selloff than this upcoming week. In the past I have referred to is as “The Weakest Week”. Since 1961 the week following the 3rd Friday in September has produced the most bearish results of any week. Below is

The rate of failure in quantitative finance is high, and particularly so in financial machine learning. The few managers who succeed amass a large amount of assets, and deliver consistently exceptional performance to their investors. However, that is a rare outcome, for reasons that will become

Smart Portfolios is about building and maintaining smart investment portfolios. At its heart are the three key questions every investor needs to answer: 1. What to invest in. 2. How much to invest. 3. When to make changes to a portfolio. Author Robert Carver addresses these three areas by providing

As we have mentioned before, here, here and here, there is overwhelming evidence that the number of stock anomalies in the universe is much lower than originally thought. Most of the previous research papers attempt to filter out past anomalies in the literature (generally over 300+) by applying

It was exactly 100-episodes ago when I first had Bert Mouler on the podcast. This week, I’m joined by him again for a second interview… Bert is an algorithmic trader with a serious focus on machine learning. His trading decisions are driven purely by data, and he goes to great lengths to remove

Equity factors can be valued using fundamental metrics Value and Size are cheap while Low Volatility and Growth are expensive Likely more meaningful for medium- to long-term than short-term investors INTRODUCTION The term “Factor Investing” reached an all-time high this year according to Google

In the first three articles of our Dynamic Asset Allocation for Practitioners series (article 1, article 2, article 3), we focused on the first half of the total process. We specified a universe of global asset classes and sorted it on relative strength with 21 different raw and risk-adjusted

In this article series Imanol Pérez, a PhD researcher in Mathematics at Oxford University, and an expert guest contributor to QuantStart continues the discussion of high-frequency trading via the introduction of the limit order book. As we saw in the in the first article of the series, the

Prof. Richard Price, an old friend, co-author, and Alpha Architect advisory board member, is working on some cool new co-authored research that requires audience participation! Dr. Price, alongside Professors Dipankar Ghosh, and Atul Rai, are conducting research to better understand what factors are