Quant Mashup
Using Fundamentals to Improve Pairs Trading Strategy [Quantpedia]
Pairs trading strategy’s return depends on the divergence/convergence movements of a selected pair of stocks’ prices. However, if the stable long term relationship of the stocks changes, price will not converge and the trade opened after divergence will close with losses. We propose a new model
- 7 years ago, 8 Aug 2016, 03:19am -
Simple Moving Average Filter | Trading Strategy [Oxford Capital]
I. Trading Strategy Source: Kaufman, P. J. (2013). Trading Systems and Methods. New Jersey: John Wiley & Sons, Inc. Concept: Trend following trading strategy based on Simple Moving Average (SMA) filters. Research Goal: To benchmark the Simple Moving Average (SMA) against the Hull Moving Average
- 7 years ago, 5 Aug 2016, 02:29pm -
SEBI Releases Paper on Algorithmic Trading & Co-Location [Quant Insti]
SEBI issued a discussion paper today with inputs from all stakeholders such as investors, infrastructure institutions and intermediary to understand how Algorithmic Trading has led to fairness, concerns and changes in market quality in recent years. It states that more than 80% of the orders placed
- 7 years ago, 5 Aug 2016, 02:28pm -
Most Useful Investment Blogs [Dual Momentum]
As with many people these days, most of my investment information comes from the internet. It has taken me years to compile a group of research-oriented blogs and websites that I have found most useful. Here is my list: Investment Blogs Quantocracy: This is an aggregator of quantitative trading
- 7 years ago, 4 Aug 2016, 12:02pm -
50 Years Of Sharpe Ratio Analysis: Useful But Easily Abused [Capital Spectator]
The Sharpe ratio was introduced half a century ago and it’s still going strong. Although the world is now awash with competitors, the granddaddy of quantitative risk metrics endures. Its longevity and widespread use drives some analysts batty, but for good or ill the SR is deeply embedded into the
- 7 years ago, 4 Aug 2016, 12:02pm -
Flat and Slightly Down for Trend Following in July [Wisdom Trading]
June 2016 Trend Following: UP -1.34% / YTD: -0.92% Not much volatility for the index in the month of July. It started around +1% and finished around -1% with little amplitude in the middle. The YTD just turned slightly negative. Below is the full State of Trend Following report as of last month.
- 7 years ago, 4 Aug 2016, 12:01pm -
How Do VelocityShares' BSWN, LSVX, & XIVH Work? [Six Figure Investing]
The indexes that power VelocityShares new BSWN, LSVX, and XIVH funds have been live since 2011, but they haven’t been directly accessible via exchange traded products until July 2016. The goals of these new funds are pretty straightforward, on the long side BSWN & LSVX track upside volatility
- 7 years ago, 4 Aug 2016, 09:03am -
Podcast: Interview with Yves Hilpisch of @PythonQuants [Chat With Traders]
This episode features Dr. Yves Hilpisch—the founder of The Python Quants. TPQ do a lot of good for those involved in quantitative finance, they; frequently host meet-ups and workshops, have developed platforms and analytics libraries, and often contract to exchanges, banks and hedge funds for
- 7 years ago, 3 Aug 2016, 09:55pm -
Start Dates, Correlation and Random Strategy [Alvarez Quant Trading]
In my last post I showed research on how optimization results can be mean reverting. Sometimes, my research keeps getting side tracked as I think of random ideas to look at. In this post, we look at the random walk my research took starting from my mean reverting optimization research. I will show
- 7 years ago, 3 Aug 2016, 12:11pm -
Practical Ethereum Arbitrage Experiments [Koppian Adventures]
Introduction Inspired by another blogpost I decided to experiment with trading arbitrage between different exchanges. Not so long ago there was a hardfork in the blockchain-based cryptocurrency Ethereum. This means that we now have two Ethereums: Ethereum (ETH) and Ethereum Classic (ETC). The
- 7 years ago, 3 Aug 2016, 12:09pm -
Mailbag: How Do You Move From Quant Developer To Quant Trader? [Quant Start]
I was emailed recently with a career-related question about jumping from one quant role to another. The question posed was "How can I make the jump from being a quant/software developer to a quant trader/researcher in a fund or investment bank?". This is certainly possible and does happen
- 7 years ago, 2 Aug 2016, 07:09am -
Cassandra as a Historical Finance DB [Ryan Kennedy]
While the explosion of noSQL database offerings of late can be daunting, each of them is typically suited for a particular purpose. Most CRUD web-applications can be comfortably done with either noSQL or a RDBMS, however for true high performance applications, the choice of database is of
- 7 years ago, 2 Aug 2016, 06:12am -
Fine Wine is a Fine Addition to Your Investment Portfolio [Alpha Architect]
Here we are in August, a great time to drink–and think–about wine. Of course, as a research-focused finance blog, our angle on wine is a bit different than that of Dr. Vino. A summary of the discussion: …we estimate a real financial return to wine investment (net of storage costs) of 4.1%,
- 7 years ago, 2 Aug 2016, 06:12am -
Paper: Stock Portfolio Design and Backtest Overfitting (h/t Abnormal Returns)
We demonstrate a computer program that designs a portfolio consisting of common securities, such as the constituents of the S&P 500 index, that achieves any desired profile via in-sample backtest optimization. Unfortunately, the program also shows that these portfolios typically perform
- 7 years ago, 1 Aug 2016, 01:34pm -
Empirical Analysis of Limit Order Books [Quant Insti]
What is an Order book? With the growing popularity of Algorithmic and High Frequency Trading, study of order books has grown manifolds. “Order book” is essentially an electronic list of all Buy and Sell orders, arranged as per price time priority. This means that a person having higher price on
- 7 years ago, 1 Aug 2016, 12:06pm -
Can Dividend (Swaps) Replace Bonds? [Flirting with Models]
Summary As a stand-alone asset class, dividends may make an interesting alternative to fixed income: they offer low volatility, are generally robust to market crises, and may serve as an inflation hedge. Accessing dividend strips was previously restricted to institutional investors, using
- 7 years ago, 1 Aug 2016, 10:41am -
The Case for Hedge Funds / Creating an Ideal Liquid Alt [EconomPic]
A hedge fund is simply a go anywhere investment vehicle that attempts to provide excess returns to cash with a low correlation to traditional asset classes (i.e. vehicles that provide alpha). Hedge funds and liquid alternatives have taken a lot of heat recently, much of it deserved, but in this post
- 7 years ago, 29 Jul 2016, 01:18pm -
Clustering: "Two's company, three's a crowd" [Quant Dare]
It’s hard enough deciding which Machine Learning technique to use, but after selecting an appropriate clustering algorithm the next challenges begin: how good is the separation and into how many groups should you divide the data? Maybe three is not always a crowd… First, let’s set the scene We
- 7 years ago, 29 Jul 2016, 01:17pm -
Look at Data with a Discerning Eye [Flirting with Models]
I recently came across a graph similar to the following while doing some market research. 1 Source: Yahoo! Finance. Analysis by Newfound Research. Data from January 1951 – December 2015. The argument was that the markets are getting more volatile. While this certainly looks to be the case based on
- 7 years ago, 28 Jul 2016, 11:09am -
Trading Ethereum: Making 10% every 20 minutes [Jon.IO]
This is more of a "How to build your own algotrading strategy - the Ethereum edition" and not a "make money fast" blog post. It is also a real example with real returns (and real production errors that cost me money) where you can see how to identify opportunities, why
- 7 years ago, 28 Jul 2016, 11:09am -
Asset Class Risk Premiums Explained by Skewness [Quantpedia]
We present extensive evidence that "risk premium" is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit an approximately linear relation between the Sharpe ratio of various risk premium strategies
- 7 years ago, 28 Jul 2016, 11:08am -
Tight Consolidations After New Highs [Quantifiable Edges]
The range over the last week has been extremely tight. On 7/20/16 SPY closed at a 50-day high. Every SPY close in the 5 days since 7/20 has been within the intraday range of that 7/20/16 bar. (And it wasn’t even that big of a range.) It is said that consolidations are often resolved in the
- 7 years ago, 28 Jul 2016, 10:18am -
Momentum on Individual Stocks vs Asset Classes [Sharpe Returns]
I had the pleasure of finally meeting Gary Antonacci earlier this year. Gary is the creator of the momentum strategy that I follow and have been discussing on this blog. I first came across his work in 2011 on the blog Abnormal Returns (which should be a daily read for investors). Gary and I have
- 7 years ago, 28 Jul 2016, 04:39am -
Beginner's Guide to Unsupervised Learning [Quant Start]
The majority of machine learning posts to date on QuantStart have all been about supervised learning. In this post we are going to take a look at unsupervised learning, which is a far more challenging area of machine learning. Supervised learning involves taking a number of data observations, each
- 7 years ago, 28 Jul 2016, 04:39am -
Evidence-Based Investing Requires Less Religion and More Reason [Alpha Architect]
During the 1600s, the Dutch had a large merchant fleet and the port city of Amsterdam was a dominant commercial hub for trade from around the world. Based on the growing influence of the Dutch Republic, in 1602 the Dutch East India Company was founded, and its evolution into the first publicly
- 7 years ago, 27 Jul 2016, 12:32pm -
Pair Trading Strategy and Backtesting using Quantstrat [Quant Insti]
One of my favorite classes during EPAT was the one on statistical arbitrage, so the pair trading strategy seemed a nice idea for me. My strategy triggers new orders when the pair ratio of the prices of the stocks diverge from the mean. But in order to work, we first have to test for the pair to be
- 7 years ago, 27 Jul 2016, 10:23am -
The Unbearable Transience of Alpha [Quandl]
In 2004 I enjoyed my 15 minutes of fame for an article I wrote called The Tao of Alpha, in which I explained the concept of alpha as a zero-sum game. Sources of alpha in 2004 were much different than those available in the mid-1990s when I started my career and they are also different from
- 7 years ago, 27 Jul 2016, 03:34am -
Paper: The Trinity Portfolio [Meb Faber]
Let’s say one sets out to design a portfolio, knowing everything we know today about investing. Where would a logical, evidence-based investor even start? Investors today have access to more market data and strategic information than at any other time in history. While beneficial in some ways,
- 7 years ago, 26 Jul 2016, 01:32pm -
What is the Proper Benchmark for Momentum or Trend-Following Strategies? [Blue Sky AM]
Most academics and practitioners tend to compare momentum or trend-following strategies to a buy and hold investment strategy. They do so by comparing the results of the strategies to a benchmark that is a proxy for buy and hold. From this type of analysis many ‘experts’ justify why the
- 7 years ago, 25 Jul 2016, 07:59pm -
From trading ideas to robust strategies [Better System Trader]
To prepare for the previous episode on system trading through the Brexit, I had to dig through some of the past podcast episodes for background information. As I was going through them I realized there was so much great information there, some that I had already forgotten about. Such a shame, all
- 7 years ago, 24 Jul 2016, 12:05pm -
What Drives Momentum Performance? [EconomPic]
Mar Vista Investment Partners has a really interesting research piece out The Price You Pay which has a great table outlining the benefit of an asymmetric return profile (i.e. having more market exposure during up markets than down markets). It is a mathematical truism that superior down capture in
- 7 years ago, 22 Jul 2016, 03:04pm -
The Arbitrage of Price-to-Book [Portfolio Perfection]
The trending value strategy buys the top 25 stocks by their 6 month price momentum among the top decile of stocks ranked by value composite 2 (VC2), a combination of price-to-earnings ratio, price-to-sales ratio, price-to-book ratio, earnings before interest tax depreciation and amortization to
- 7 years ago, 22 Jul 2016, 12:58pm -
Quantitative Strategy Development Overview – Brian Peterson [Open Source Quant]
I have had the pleasure of getting to know and work with Brian Peterson of late building out the blotter::mcsim function in the blotter package. I will be writing about this function soon and where it is headed, but in this post i wanted to share a presentation Brian gave the CapeR User Group last
- 7 years ago, 21 Jul 2016, 11:03pm -
Risk Managing Risk Management [Flirting with Models]
Well, despite some recent market turmoil from the Brexit, the S&P 500 is still hovering near its high from last year on a price basis. If we include the reinvestment of dividends, then we have already seen new highs in April, May, and June of this year. As we wrote about previously, a bear
- 7 years ago, 21 Jul 2016, 11:26am -
Stale Performance Chasing: Beware of Horizon Effects [Alpha Architect]
Investors talk a big game when describing how they evaluate mutual funds. They say they consider things like the objectives of the fund, its size, and the longevity of its managers. But there’s one factor that looms larger than all the others: Performance. We wrote here about how investors tend to
- 7 years ago, 21 Jul 2016, 11:25am -
Unbalanced Classes in Machine Learning and the Stock Market [MKTSTK]
Many assets exhibit bull or bear trends which persist for long periods of time. This presents an interesting problem for anyone trying to predict the future return of an asset: a lack of diversity in your training set. This problem is known as unbalanced classes in the machine learning field. The
- 7 years ago, 20 Jul 2016, 02:20pm -
Machine Learning in Algorithmic Trading Systems Presentation [Robot Wealth]
Last night it was my pleasure to present at the Tyro Fintech Hub in Sydney on the topic of using machine learning in algorithmic trading systems. Here you can download the presentation Many thanks to all who attended and particularly for the engaging questions. I thoroughly enjoyed myself! In
- 7 years ago, 20 Jul 2016, 11:00am -
Hull Moving Average Filter | Trading Strategy (Entry & Exit) [Oxford Capital]
Developer: Alan Hull. Source: Kaufman, P. J. (2013). Trading Systems and Methods. New Jersey: John Wiley & Sons, Inc. Concept: Trend following trading strategy based on low lag moving averages. Research Goal: To verify performance of the Hull Moving Average (HMA). Specification: Table 1.
- 7 years ago, 20 Jul 2016, 11:00am -
Impact of 1987 Black Monday on Trading Behavior of Stock Investors [Quantpedia]
Using a simple sign test, we report new empirical evidence, taken from both the US and the German stock markets, showing that trading behavior substantially changed around Black Monday in 1987. It turned out that before Black Monday investors behaved more as in the momentum strategy; and after Black
- 7 years ago, 20 Jul 2016, 10:59am -
Style Momentum in Australia? [Alpha Architect]
Jegadeesh and Titman (1993) popularized a simple idea: "past winners outperform past losers." Post JT, the relative strength, or "momentum anomaly," was forever ingrained in the minds of academic researchers (which is odd, since the idea had been around 50 years prior to JT 1993,
- 7 years ago, 19 Jul 2016, 01:15pm -
Introduction to Zipline in Python [Quant Insti]
Python has emerged as one of the most popular language for programmers in financial trading, due to its ease of availability, user-friendliness and presence of sufficient scientific libraries like Pandas, NumPy, PyAlgoTrade, Pybacktest and more. Python serves as an excellent choice for automated
- 7 years ago, 19 Jul 2016, 02:45am -
Where are the billionaire financial academics? [Mathematical Investor]
According to the just-published 2016 Rich List of the World's Top-Earning Hedge Fund Managers by Institutional Investor's Alpha magazine, eight of the top ten earners fall into the "quant" category, and half of the 25 richest of the year are quants. The firms listed include the
- 7 years ago, 18 Jul 2016, 12:42pm -
Combining Different Momentum Factors [Systematic Relative Strength]
Momentum can be calculated in a number of different ways. As long as you are measuring the strength of price appreciation over an intermediate time horizon most logical calculation methods will work to one degree or another. The standard, academic definition of momentum usually means taking the
- 7 years ago, 18 Jul 2016, 12:42pm -
RNeat – Square Root Neural Net Trained Using Augmenting Topologies [Gekko Quant]
A simple tutorial demonstrating how to train a neural network to square root numbers using a genetic algorithm that searches through the topological structure space. The algorithm is called NEAT (Neuro Evolution of Augmenting Topologies) available in the RNeat package (not yet on CRAN). The training
- 7 years ago, 18 Jul 2016, 01:06am -
The Case for Buying Bonds in Inflationary Historical Environments [EconomPic]
I made a recent short-term case for bonds in a recent post given my view that low rates may be disinflationary, despite my view that they have a "horrific risk / return profile" over the longer-term. This post will highlight that what matters over the longer term is the level of inflation
- 7 years ago, 15 Jul 2016, 01:21pm -
Quantpedia Trading Strategy Series at Quantopian [Quantpedia]
We are really excited that we can announce, that Quantopian started to publish series of articles where they will really deeply analyze some of Quantpedia's suggested strategies. We think, that Soeng Lee from Quantopian did a really good job with a first article, so we just wanted to point that
- 7 years ago, 15 Jul 2016, 11:46am -
Research Review | 15 July 2016 | Portfolio Analysis [Capital Spectator]
Asset Allocation: A Recommendation for Resolving the Collision between Theory and Practice Larry J. Prather (Southeastern Oklahoma State University), et al. April 26, 2016 We examine the creation of a low-cost optimal risky portfolio that individual investors can easily construct and manage. We
- 7 years ago, 15 Jul 2016, 08:41am -
Interview With Artur Sepp: Part Two [Factor Wave]
This is the second and concluding part of our interview with Artur Sepp. Q: If you had an account of $100k, what would you trade? A: Well, if I had $100k I would manage it using the three strategies. The core strategy is based on the dividend growth. I would be very conservative with the companies I
- 7 years ago, 14 Jul 2016, 11:20pm -
Developing A Volatility Carry Strategy [Jonathan Kinlay]
By way of introduction we begin by reviewing a well known characteristic of the iPath S&P 500 VIX ST Futures ETN (NYSEArca:VXX). In common with other long-volatility ETF /ETNs, VXX has a tendency to decline in value due to the upward sloping shape of the forward volatility curve. The chart below
- 7 years ago, 14 Jul 2016, 11:12am -
High Sigma Events - They're Not All Black Swans [Six Figure Investing]
After every crash or major geopolitical event that roils the market we are exposed to graphics like this one containing sigma numbers: Black Swan The message associated with these charts is usually, "We should be very worried because the events that just occurred were really unlikely." The
- 7 years ago, 14 Jul 2016, 11:12am -