Over the past thirty-two years, since 1983, the S&P 500’s performance during January’s option expiration week has been essentially a mixed bag. Monday has been up 18 of the last 32 years, Friday is similar; up 16 and down 16, and the entire week has been down roughly three times

Financial intermediaries trade frequently in many markets using sophisticated models. Their marginal value of wealth should therefore provide a more informative stochastic discount factor (SDF) than that of a representative consumer. Guided by theory, we use shocks to the leverage of securities

Our first guest for the “Interviewing the Quants” series is Vangelis Maderakis. Many of you probably know him as Sanz Prophet through the eponymous blog (sanzprophet.blogspot.com). Recently, he became a partner at Logical Invest, a successful business dedicated to logical, rules based

Scott’s Investments provides a free “Dual ETF Momentum” spreadsheet which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum. Antonacci has a new book out, Dual Momentum Investing: An Innovative

In this post we will look at the backtest results (summary statistics) for the three versions of the SPX "no touch" Iron Condor (IC) trades. The three versions tested were: Standard: 10 put credit spreads, and 10 call credit spreads Delta Neutral: 10 put credit spreads, and from 5 to 10

This is the first article in what will become a set of tutorials on how to carry out natural language document classification, for the purposes of sentiment analysis and, ultimately, automated trade filter or signal generation. This particular article will make use of Support Vector Machines (SVM)

Different commodity including some volatility and bitcoin futures settle to an average value. For example VSTOXX settles to 1 minute sampled average value of the index in the last half hour of trading, Bitmex XBT/USD futures settle to 1 minute sampled average value of the last two hours of trading,

Simply looking at a graph of a VIX ETP like VXX or XIV doesn’t tell us much about the underlying forces at play in the VIX complex. ETP prices are merely the end result of the relationship between these underlying forces (which is why traders shouldn’t rely too heavily on price to

First off, before beginning this post, I’d like to make my readers aware of the release of a book that I contributed almost an entire chapter for. Quantitative Trading With R is a primer on quantitative trading in R written by Harry Georgakopoulos, one of Chicago’s better quants. I

Research in experimental psychology suggests that, in violation of Bayes' rule, most people tend to “overreact” to unexpected and dramatic news events. This study of market efficiency investigates whether such behavior affects stock prices. The empirical evidence, based on CRSP

In a post on LinkedIn I referred to the concept of CrashMetrics and how it can be used for portfolio protection. It’s a simple approach to the management of extreme risk that works rather well. It can be summarized as “CAPM for crashes”. Here’s how it works. Let’s

ear cycle for S&P500 and the top graph shows mean and median for year 1957 to 2014, the second graph is from 2000 to 2014. The graph is marked with year trading days from 1 to 249.

This is a follow up to a piece from the always excellent VIX & More: 2014 Had Third Highest Number of 20% VIX Spikes. V&M finds, as the title suggests, that 2014 exhibited the third most 1-day VIX spikes of at least 20% since 1990. In this post I look at a different definition of VIX spikes

As some of you know, I recently began trading two monthly ETF Rotation Systems. One is a Basic ETF Rotation system that trades a diverse group of markets and the other covers similar markets using Schwab Commission Free ETF’s. The Basic System is intended to take the place of the ETF Portion

It’s that time of year again. Yup, that jolly, happy time of year when the soothsayers of Wall Street start trumpeting their views on what’s going to happen in 2015, and how to position portfolios to profit. Esteemed Wharton professor, Jeremy Siegel, author of the permabull bible, Stocks for the

By Yang GaoEstimize is an online-community utilizing 'wisdom of crowds' to offer intelligence about market. It contains a wide range of crowd-sourced estimates from over 4,500 buy-side, sell-side and individual analysts. Studies (from Deustche Bank and Rice University among others) show

We enjoy collaborating on new research projects simply because nobody has a monopoly on interesting ideas. Where our expertise in asset allocation, tactical strategies and portfolio optimization methods might prove useful, we are always open to discussing new and ongoing research.

There were a number of Quantifinder studies yesterday that looked at SPY and/or SPX making short-term lows, closing down 3+ days in a row, and/or leaving unfilled gaps down. The study below it combined all of these ideas.

As I discussed last week, the time between Christmas and New Year’s tends to be a very strong seasonal period. (And even through the 1st or 2nd trading day in January). Wednesday was only the 11th time since 1960 that SPX fell greater than 1% on a day during this week.

I’ve been posting and updating the “Twas 3 Nights Before Christmas” study on the blog here since 2008. The study will kick in at today’s close. This year I will again show the Nasdaq version of the study. While all the major indices have performed well during this period, the

One of the best months of the year for our Trend Following Wizards. Not so surprisingly after the strong performance of the State of Trend Following Index (nearing +10% return for November).

From my post on Heikin-Ashi Charts, another researcher wrote Luck: The Difference Between Hired or Fired about how luck of the draw could account for the difference in returns depending on the starting date. This is a completely valid question. Are three better returns for a strategy in a particular

When we left off in Part 1, we promised to examine how select Global Tactical Asset Allocation products stack up against the Global Market Portfolio from the perspective of several performance measures – particularly Sharpe ratio, alpha and information ratio. Without further adieu: