Quant Mashup
High Capital Gains, Low Expected Returns: A Frustrating Combination [Flirting with Models]
When carried through a traditional mean-variance optimization process, J.P. Morgan’s capital market assumptions imply a significant overweight to satellite bonds. Many portfolios have significant capital gains as a result of strong equity and fixed income markets over the last 30+ years. However,
- 7 years ago, 19 Sep 2016, 06:41pm -
Trading with Interactive Brokers using Python: An IBPy Tutorial [Quant Insti]
Since we are gearing up for our webinar on Trading with Interactive Brokers using Python, I thought it would be very good if give you a brief insight on Interactive Brokers API and using IBPy to implement Python in IB’s TWS. As we proceed Interactive Brokers demo account and IBPy. Towards the end
- 7 years ago, 19 Sep 2016, 06:40pm -
Case Study: Leveraging Risk Efficient Portfolios for enhanced returns [KKB Research]
Academics have been shouting from the rooftops about risk-efficient portfolios (minimum variance, minimum correlation, minimum expected shortfall etc) and their merits, for some time now. This has led to a suite of indices from EDHEC-Risk, many minimum variance funds, ETFs, risk parity products and
- 7 years ago, 19 Sep 2016, 09:33am -
Why Momentum Is Struggling [Larry Swedroe]
Momentum is the tendency for assets that have performed well (poorly) in the recent past to continue to perform well (poorly) in the future, at least for a short period of time. Mark Carhart, in his 1997 study “On Persistence in Mutual Fund Performance,” was the first to use momentum, together
- 7 years ago, 19 Sep 2016, 09:33am -
The Weakest Week Is Back [Quantifiable Edges]
From a seasonality standpoint, there isn’t a more reliable time of the year to have a selloff than this 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 a graphic
- 7 years ago, 19 Sep 2016, 09:33am -
The Future of Quant Finance Careers [Quant Start]
The world of quantitative finance continues to evolve at a rapid pace. Even in the last four years of the existence of this site the market for quant jobs has shifted significantly. In this article we outline these shifts. The advice on what is likely to be in demand in the next few years will be
- 7 years ago, 19 Sep 2016, 02:26am -
Podcast: Adapting to market conditions with John Ehlers [Better System Trader]
Building robust trading strategies that can detect and adapt to market conditions can be a real challenge, and failure to do so can often result in poor trading performance and drawdowns. How can we build more robust trading strategies that adapt to market conditions as they change? Our guest for
- 7 years ago, 18 Sep 2016, 10:55am -
Average TAA Allocation by Month [Allocate Smartly]
We delayed adding the latest strategy to our site (GestaltU’s Adaptive Asset Allocation) for a week due to technical hurdles running the minimum variance component of the strategy in near real-time for members. Historical results on GestaltU’s strategy are exceptional though, and we plan to have
- 7 years ago, 16 Sep 2016, 03:33pm -
Was the Financial Crisis Really a Valuation Crisis? [Alpha Architect]
Most people look back at the dot-com bubble and acknowledge valuations were elevated far above historical norms. Investors ignored historically useful fundamentals, such as earnings and book value, and started relying on measures like eyeballs and clicks. Investors really started to believe, “This
- 7 years ago, 16 Sep 2016, 03:33pm -
Factor Investing: Buyer Beware [Dual Momentum]
A highlight of the 2016 Morningstar ETF Conference was the keynote address by the former leader of U.S. Navy Seal Team Six, Rob O’Neill. Chief O’Neill shared some stories about his training and operations as an elite Navy Seal. The take away lessons from his talk were the importance of
- 7 years ago, 16 Sep 2016, 10:48am -
A Persistent Kind Of Momentum [Larry Swedroe]
Time-series momentum examines the trend of an asset with respect to its own past performance. This is very different than cross-sectional momentum (often referred to as Carhart momentum), which compares the performance of an asset with respect to the performance of another asset. Ian D’Souza,
- 7 years ago, 16 Sep 2016, 10:48am -
Loading and Manipulating Historical Data From .csv Files [Dekalog Blog]
In my last post I said I was going to look at data wrangling my data, and this post outlines what I have done since then. My problem was that I have numerous csv files containing historical data with different date formats and frequency, e.g. tick level and hourly and daily OHLC, and in the past I
- 7 years ago, 16 Sep 2016, 10:48am -
Podcast: This quants’ approach to designing algo strategies - Michael Halls-Moore [Chat With Traders]
For this episode I’m joined by Michael Halls-Moore, who runs QuantStart.com—a site well-known by many algorithmic traders. Prior to trading, Michael studied computational fluid dynamics and was the co-founder of a tech startup, before getting involved a small equity fund as a quant
- 7 years ago, 15 Sep 2016, 03:50am -
Algorithmic Trading Strategies: Paradigms and Modelling Ideas [Quant Insti]
‘Looks can be deceiving,’ a wise person once said. The phrase holds true for Algorithmic Trading Strategies. The term Algorithmic trading strategies might sound very fancy or too complicated. However, the concept is very simple to understand, once the basics are clear. In this article, I will be
- 7 years ago, 15 Sep 2016, 03:50am -
Value investing is quite possibly the worst idea...EVER [Alpha Architect]
We believe deeply in the value philosophy as first described by Ben Graham: view stocks as ownership in a firm; buy with a margin of safety; avoid stories; think independently; and so forth. In fact, I was so intellectually stimulated by value investing I wrote my dissertation on the subject,
- 7 years ago, 15 Sep 2016, 03:50am -
The Expensive Lesson of Closet Indexing: Avoid Low Active Share and High Expenses [Alpha Architect]
The promise of active investing is compelling: the opportunity to earn higher risk-adjusted returns! And paying a fee to an active manager–who is doing something unique–can make sense. And as we know, the only way to beat a benchmark is by being different from the benchmark, as we discuss here.
- 7 years ago, 13 Sep 2016, 11:39am -
Carry Trade Returns and Political Risks [Quantpedia]
This paper elucidates the channels through which sovereign risk, exchange rates and currency risk premia are related. I show that the channels are different depending on whether a country is classified as emerging or an advanced economy. Generally, for emerging market economies, local sovereign risk
- 7 years ago, 13 Sep 2016, 11:39am -
Sharp Decline in VXO and the New Market Environment [Quantifiable Edges]
Yesterday I showed a VIX-related study that suggested it was so stretched to the upside that the market was likely to get a quick bounce. And we certainly got one on Monday. The VIX is a measure of options pricing and is often referred to as a “fear index”. It saw a 13% drop on Monday.
- 7 years ago, 13 Sep 2016, 11:39am -
Optimizing for Anxiety [Flirting with Models]
When carried through a traditional mean-variance optimization process, J.P. Morgan’s capital market assumptions imply a significant overweight to satellite bonds. Investors can suffer from behavioral biases – particularly around reference points – that can make normative optimal portfolios
- 7 years ago, 13 Sep 2016, 05:22am -
Ask Me Anything Video [Alvarez Quant Trading]
In this short five minute video I will answer the following questions: I am interested in knowing a little bit more about your own trading. What types of strategies are you trading? Why do you not manage outside money? What are the trading books you recommend? Do you have a trading or AmiBroker or
- 7 years ago, 12 Sep 2016, 08:10pm -
Applications of Graph Theory In Finance [Jonathan Kinlay]
Very large datasets – comprising voluminous numbers of symbols – present challenges for the analyst, not least of which is the difficulty of visualizing relationships between the individual component assets. Absent the visual clues that are often highlighted by graphical images, it is easy for
- 7 years ago, 12 Sep 2016, 08:09pm -
Trend Following after Drawdowns [Wisdom Trading]
Historical Performance of Trend Following Post-Drawdown August marked a local low for our Trend Following index, reaching about two thirds of the max historical drawdown. We were commenting on the fact that, historically, drawdowns have typically proved a good time to invest or start trading a trend
- 7 years ago, 12 Sep 2016, 11:32am -
What The VIX Spike Is Suggesting For The Next Few Days [Quantifiable Edges]
Friday’s big drop was accompanied by a big spike in options prices as measured by the VIX. The VIX rose so sharply that it closed Friday 32% above its 10-day moving average. The study below examines stretches of 25% or more, and how the SPX has performed in the following days.
- 7 years ago, 12 Sep 2016, 11:31am -
Hidden Markov Models - An Introduction [Quant Start]
A consistent challenge for quantitative traders is the frequent behaviour modification of financial markets, often abruptly, due to changing periods of government policy, regulatory environment and other macroeconomic effects. Such periods are known colloquially as "market regimes" and
- 7 years ago, 12 Sep 2016, 02:28am -
The Coppock Curve Applied to Global Markets [Meb Faber]
I get most of my quant research done while trying to avoid other less interesting work. So I was curious when I saw my friend John Hussman writing about an obscure technical indicator called the Coppock Curve. I filed it away as “interesting”, sent it to the Idea Farm list, then moved on. But
- 7 years ago, 12 Sep 2016, 02:28am -
Quantopian Trading Strategy Series: Reversal during Earnings Announcements [Quantpedia]
We are really excited that Quantopian & Quantpedia Trading Strategy Series continues with a second article focused on Reversal Effect during Earning Announcements (Strategy #307). Click on a "View Notebook" button to read a complete analysis:
- 7 years ago, 9 Sep 2016, 12:52pm -
David Varadi's Percentile Channels [Allocate Smartly]
This is a test of a tactical asset allocation strategy from David Varadi of CSS Analytics. I’ve been a long-time fan of David’s work. David always devises unique approaches to trading, swimming just outside the mainstream. This strategy is a good example of that. The strategy is notable for its
- 7 years ago, 9 Sep 2016, 10:48am -
Reviewing Bear-Market-Risk Signals Over The Past Year [Capital Spectator]
A year ago, bear-market risk looked elevated for the US stock market, based on a Hidden Markov model (HMM). The warning, which was discussed on these pages at the time (see here, for instance), has had a mixed record. Although stocks swooned in late-2015 and early 2016, the growling was relatively
- 7 years ago, 9 Sep 2016, 10:46am -
The Discipline of Value Investing [Investing Research]
Value has a long history as an investing style, backed up by empirical evidence that portfolios of the cheapest stocks outperform the broad market. The strategy behind value investing is simple: buy stocks with a low price relative to their current financial metrics like earnings, EBITDA or cash
- 7 years ago, 8 Sep 2016, 09:40pm -
Tracking the Performance of Tactical Strategies [CSS Analytics]
There is a cool new website that tracks the performance of well-known tactical strategies. AllocateSmartly has collected an extensive list of strategies from well-known hedge fund managers like Ray Dalio along with several other portfolio managers and financial bloggers. The backtests for these
- 7 years ago, 8 Sep 2016, 09:40pm -
Have You Stress-Tested Your Portfolio Strategy? [Capital Spectator]
The world is awash with backtests that lay claim to new portfolio techniques that provide superior results for managing risk, juicing return, or both. What’s often missing is a robust stress test to confirm that the good news is more than a statistical anomaly. Crunching the numbers on a single
- 7 years ago, 8 Sep 2016, 02:33pm -
Intro to Possible New Book [Factor Wave]
Quantitative Trading for Non-Quantitative Traders This title might seem like a contradiction. You might think that non-quantitative traders are incapable of quantitative trading. This isn’t true. They might not be able to discover quantitative insights or read scholarly papers but they can
- 7 years ago, 8 Sep 2016, 02:33pm -
How difficult is it to design a stock fund based on backtests? [Mathematical Investor]
Over USD$2 trillion is held in exchange-traded equity funds, just in the U.S., with hundreds of new funds added each year. Strategies vary from simple index-tracking funds to funds that follow sophisticated strategies (e.g., “smart beta”) designed to yield impressive results, based on backtests.
- 7 years ago, 8 Sep 2016, 02:31am -
Trend Following Works Weakest After Crises [Larry Swedroe]
Time-series momentum examines the trend of an asset with respect to its own past performance. This is different than cross-sectional momentum (often referred to as Carhart momentum), which compares the performance of an asset with respect to the performance of another asset. Research into
- 7 years ago, 8 Sep 2016, 02:31am -
Is momentum investing dead? Or is it just painful? [Alpha Architect]
Sometimes even the best evidence-based active investment strategies can create a formidable challenge to investors seeking to exploit them. Case in point — momentum investing. On the one hand, stock-selection momentum strategies (here is a link to more information) can have the potential to
- 7 years ago, 7 Sep 2016, 12:19pm -
Strategy Up/Down Capture [Alvarez Quant Trading]
A reader sent this interesting link about Up/Down Capture. The great part about this article it is something I have intuitively known about my trading strategies but never tried to quantify. This was the bump I needed to investigate this concept. When the SPY moves up on average how much does my
- 7 years ago, 7 Sep 2016, 12:19pm -
J.P. Morgan Outlook Implies Satellite Bonds Are King [Flirting with Models]
It is common for large asset management firms to publish their capital market assumptions: long-term global asset expected return and covariance assumptions. Yet many firms do not draw the link between what published capital market assumptions say and what they mean when carried through the
- 7 years ago, 6 Sep 2016, 11:50pm -
How a Low VIX Can Remain an Expensive Hedge [EconomPic]
One of my favorite Twitter follows @LadyFOHF shared the below scatter chart from Morgan Stanley that attempted to map areas of the global market that were both cheap (valuation ranks at the lower end of its 10-year history) and defensive (a low or negative correlation to global equities). One of the
- 7 years ago, 6 Sep 2016, 11:50pm -
Systematic risk management [Investment Idiocy]
As the casual reader of this blog (or my book) will be aware, I like to delegate my trading to systems, since humans aren't very good at it (well, I'm not). This is quite a popular thing to do; many systematic investment funds are out there competing for your money; from simple passive
- 7 years ago, 5 Sep 2016, 09:48pm -
How to Learn Advanced Mathematics Without Heading to University - Part 3 [Quant Start]
In the first and second articles in the series we looked at the courses that are taken in the first half of a four-year undergraduate mathematics degree - and how to learn these modules on your own. In the first year we discussed the basics - Linear Algebra, Ordinary Differential Equations, Real
- 7 years ago, 5 Sep 2016, 04:46am -
Trading on Sentiment with Richard Peterson [Better System Trader]
Trading algorithmically based on sentiment data is a relatively new field compared to more established approaches. With the explosion of social media and computing power, the analysis of sentiment data has also increased, with some hedge funds committing considerable resources to researching the
- 7 years ago, 5 Sep 2016, 04:44am -
Effect of Maturity Structure of Roll Yields in Commodity Futures Strategies [Quantpedia]
We investigate the maturity-structure of roll strategy returns in the energy futures markets. Our innovation is to report and analyze the risk/return profile, the Sharpe ratio, and the asset pricing loadings of rollover strategies based on futures contracts of the same underlying commodity but with
- 7 years ago, 5 Sep 2016, 04:44am -
Backtesting With Zipline Ii [Koppian Adventures]
In this post, we play again little bit around with python and the pandas-library. You may want to read the first part of this series. There we have backtested a simple crossing moving average strategy in pandas. We had a long/slow moving average over the last 40 days and a fast/short moving average
- 7 years ago, 3 Sep 2016, 12:32pm -
Possible Addition of NARX Network to Conditional Restricted Boltzmann Machine [Dekalog Blog]
It has been over three months since my last post, due to working away from home for some of the summer, a summer holiday and moving home. However, during this time I have continued with my online reading and some new thinking about my conditional restricted boltzmann machine based trading system has
- 7 years ago, 3 Sep 2016, 12:31pm -
AllocateSmartly [TrendXplorer]
Launched only recently, AllocateSmartly.com tracks the industry’s best tactical asset allocation strategies with thorough, up-to-date backtests. As of writing 16 (sub) strategies are tracked and benchmarked on near real-time basis. All of the tracked strategies are both quantitative and
- 7 years ago, 3 Sep 2016, 12:31pm -
When Academics Disagree on Momentum Investing [Alpha Architect]
The academic standard for intermediate-term momentum measurement is “12_2 momentum:” simply sort all stocks based on a stock’s total return over the past twelve months, ignoring the last month. (a discussion is here and here) However, a few years ago Robert Novy-Marx wrote a paper titled “Is
- 7 years ago, 2 Sep 2016, 02:57am -
State of Trend Following in August: Sharp Down Move [Au Tra Sy]
It is Fall in Summer!… The trend following index had a big move to the downside last month, taking the YTD performance to a negative level as well. The results are similar, over on the Wisdom State of Trend Following, a sort of version 2.0 of this report, which I write for them too. Please check
- 7 years ago, 2 Sep 2016, 02:56am -
August Fall for Trend Following [Wisdom Trading]
August 2016 Trend Following: UP -7.32% / YTD: -7.95% August was mostly one-sided, sliding down to a strong negative performance, and taking with it the Year-To-Date performance to a similar level. Interesting to note the shorter timeframes weighing on the index while the longer timeframes are still
- 7 years ago, 2 Sep 2016, 02:56am -
Tactical Asset Allocation Performance in August [Allocate Smartly]
This is a summary of the recent performance of a number of excellent asset allocation strategies. These strategies are sourced from books, academic papers, and other publications. They range from simple, static portfolio allocations, to complex and dynamic portfolio optimization. Read more about our
- 7 years ago, 1 Sep 2016, 09:45am -
No Signal [Automated Trader]
NO SIGNAL is a regular column where we examine various snafus in the trading, particularly the automated trading, world. We look at errors in application logic, mistakes by overzealous co-workers, failures in technology and temporary losses of power to both infrastructure as well as craniums. These
- 7 years ago, 1 Sep 2016, 09:45am -