Quant Mashup
Forex Trading Diary #4 - Adding a Backtesting Capability [Quant Start]
I've been busy working on the open-source QSForex system over the past week. I've made some useful improvements and I thought I'd share them with you in this forex trading diary update. In particular, I've made the following changes, which will be discussed at length in this
- 5 years ago, 17 Apr 2015, 10:51am -
Implied Skew Strategy [John Orford]
Previously, I checked whether historical skewness was a good indicator to buy and sell the S&P 500. My backtesting framework can now use the implied skew index as an indicator to buy or sell. Now, the strategy buys the S&P 500 if the implied skew index has dropped day over day and vice
- 5 years ago, 17 Apr 2015, 10:51am -
Part 2: Using a Self-Similarity Metric with Intraday Data to Define Market Regimes [CSS Analytics]
The Self-Similarity metric has been a popular series. Recently the original post was shared on Jeff Swanson’s popular site System Trader Success which covers a wide variety of thought provoking articles on trading system development and is worth reading. Jeff has also posted some TradeStation code
- 5 years ago, 17 Apr 2015, 02:16am -
Graham Value Portfolio Update [Scott's Investments]
In January 2012 I announced a new portfolio, a Benjamin Graham “inspired” value stock portfolio. The Graham portfolio is an attempt to add a value strategy to Scott’s Investments, which is otherwise focused on momentum, trend, income and market timing strategies. The portfolio tracks returns
- 5 years ago, 17 Apr 2015, 01:25am -
Does This VIX Signal Indicate Trouble Ahead? [Adam Warner]
Time for investors to go to the mattresses (again)? This, from CNBC: "Most investors have never heard of the three-month volatility index, which is known as the VXV. But the relationship between the CBOE three-month volatility index and the options exchange's more familiar 30-day
- 5 years ago, 17 Apr 2015, 01:25am -
Optimised CRBM Code for Gaussian Units [Dekalog Blog]
Over the last few weeks I have been working on optimising the conditional restricted boltzmann machine code, with a view to speeding it up via a C++ .oct file, and in the code box below is this .oct code for the gaussian_crbm.m code in my previous post. This gaussian_crbm.m function, plus the
- 5 years ago, 16 Apr 2015, 10:16pm -
Fed needs to walk a thin tightrope ahead of 2016... [Almanac Trader]
One clear headwind that exists for the market is the first Fed funds rate increase since June 2006. That 0.25% rate hike nudged the target rate to 5.25% and marked the last move in a major tightening cycle that began in June 2004. Including this cycle, there have been five major Fed cycles (up and
- 5 years ago, 16 Apr 2015, 10:14pm -
Social data research links: oil prices, real estate, and power laws [MKTSTK]
Oil price volatility and oil-related events: An Internet concern study perspective [ResearchGate] This paper investigates the effects of four types of oil-related events on world oil prices, using an event study methodology and an AR-GARCH model. The Internet information concerning these events,
- 5 years ago, 16 Apr 2015, 01:30pm -
The Relationship Between CAPE and Returns [EconomPic]
As I outlined in my previous post The Relationship Between Stocks and Bonds, the S&P 500 yields 3.7% at the current 27 CAPE (cyclically adjusted P/E), attractive from a relative basis to the sub 2% yield of the ten-year treasury. That said, a 3.7% yield is quite low by historical standards.
- 5 years ago, 16 Apr 2015, 01:30pm -
Nikkei 225 daily returns heatmap [UK Stock Market Almanac]
This article concerns the daily returns for the Nikkei 225 from 1984. Average daily returns The following table shows the average return since 1984 of the Nikkei 225 Index for each day of the year. For example, over the last 30 years the average daily return for the Nikkei 225 on 4 January has been
- 5 years ago, 16 Apr 2015, 01:29pm -
When VIX traders bet on a rise in volatility $SPY $VXX [@NautilusCap]
When VIX traders bet on a rise in volatility $SPY $VXX
- 5 years ago, 16 Apr 2015, 11:35am -
Some Seasonal Strength Could Help Today [Quantifiable Edges]
While most people are not fond of tax day in the US, it has historically seen strong inflows into IRA’s and hence the stock market. This has set up the day after tax day as a strong day for the market. Below is a look at how SPX has done since 1981 on tax day. The numbers are all impressive. They
- 5 years ago, 16 Apr 2015, 08:54am -
A Tutorial in R on Using A Hidden Markov Model (HMM) [Inovance]
Knowing how different market conditions affect the performance of your strategy can have a huge impact on your returns. Certain strategies will perform well in highly volatile, choppy markets while others need a strong, smooth trend or they risk long periods of drawdown. Figuring out when you should
- 5 years ago, 16 Apr 2015, 05:36am -
Re-balancing: Is it worth the time and effort? [Alvarez Quant Trading]
David Weilmuenster is today’s guest author. David and I worked together at Connors Research for eight years and is one great researcher and AmiBroker programmer. Brochures for professionally managed investments and academic white papers on long term investing almost always praise the benefits of
- 5 years ago, 15 Apr 2015, 01:35pm -
9 Mistakes Quants Make that Cause Backtests to Lie by Tucker Balch, Ph.D. [Quantopian]
Below is a follow-up article on Dr. Balch's talk he gave at Quantcon 2015. He will also present a live webinar on this topic on April 24, 2015 at 11AM EST. Click here to register. "I’ve never seen a bad backtest” -- Dimitris Melas, head of research at MSCI. A backtest is a simulation
- 5 years ago, 15 Apr 2015, 01:28pm -
Effective Strategies for Month End Seasonality [QuantLab.co.za]
Before we discuss methods to exploit the tendency for the stock market to rise during month end, I wanted to share the performance of simply implementing the strategy in its raw form against its inverse. The results are rather impressive. EOM Strategy vs EOM Inverse Strategy Performance For the test
- 5 years ago, 15 Apr 2015, 01:28pm -
Sports Analytics: Remember, Statistics aren't Perfect! [Alpha Architect]
We came across an interesting article in the Wharton Magazine blog titled “The Dangerous Data Fetishes of Sports Analytics” by Ian Cooper. The main point of the article is that some sports statistics do not add value. The main example Ian cites is the “PDO” variable which is used in hockey.
- 5 years ago, 15 Apr 2015, 01:28pm -
EM Surge leading oil? $USO [@NautilusCap]
EM Surge leading oil? $USO
- 5 years ago, 15 Apr 2015, 01:27pm -
Oil recovery reaches critical threshold $USO [@NautilusCap]
Oil recovery reaches critical threshold $USO
- 5 years ago, 15 Apr 2015, 01:27pm -
RUT Iron Condor - Dynamic Exit - 52 DTE Results Summary [DTR Trading]
Over the last eight posts we reviewed the backtest results for Iron Condors initiated at 52 days to expiration (DTE) on the Russell 2000 Index (RUT). To be consistent with all of the earlier backtests posted on this blog, we looked at 52 DTE Iron Condors initiated with short strikes at four
- 5 years ago, 15 Apr 2015, 01:27pm -
Tactical Asset Allocation with Market Valuations: Magic or Myth? [Alpha Architect]
Although it has been very difficult to overcome our initial skepticism, we've finally accepted the notion that simple technical analysis may serve as an effective way to manage risk and to time markets. As John Adams said many years ago, "Facts are stubborn things." However, our
- 5 years ago, 14 Apr 2015, 12:34pm -
MATLAB Computational Finance Conference 2015 [Only VIX]
MATLAB Computational Finance Conference was a great event that I attended last year. There is a lot to learn for average Matlab user, and anyone working in finance. The agenda looks especially exciting this year. Ping me if you want to meet during the event.
- 5 years ago, 14 Apr 2015, 12:31pm -
New Book from Adam Grimes: Quantitative Analysis of Market Data [Amazon]
Traders who understand the statistics and probabilities behind the movements of financial markets have to tools to find an enduring trading edge. This book is written to be accessible to the trader without a heavy mathematical background, and works toward a deep, intuitive understanding of
- 5 years ago, 14 Apr 2015, 11:37am -
A Few Notes on Irrational Exuberance [CXO Advisory]
In the preface to the 2015 Third Edition of Irrational Exuberance, author Robert Shiller states: “…evidence of bubbles has accelerated since the [2007-2009 world financial] crisis. Valuations in the stock and bond markets have reached high levels in the United States and some other countries,
- 5 years ago, 14 Apr 2015, 06:00am -
Short-Term Trading: Friday Momentum with Weekday Filter [Oxford Capital]
Developer: Joe Krutsinger: “One Night Stand” Trading System. Concept: Short-term trading strategy based on a weekday filter and price momentum. Source: Freeburg, N. F. (Sep. 1994). Formula Research, Quantitative Treatment of the Financial Markets. Memphis, TN: Formula Research, Inc. Research
- 5 years ago, 13 Apr 2015, 07:46pm -
The Relationship Between Stocks and Bonds [EconomPic]
A Wealth of Common Sense has a recent post 'Stock Market Losses with Low Interest Rates' that outlines: Just because interest rates are low doesn’t mean stocks can’t or won’t fall. Interest rates are a very important factor in the markets but they’re not everything. Stocks are
- 5 years ago, 13 Apr 2015, 07:43pm -
New related paper to #21 - Momentum Effect in Commodities and #22 - Term Structure Effect in Commodities [Quantpedia]
The aim of this paper is to investigate the impact of the financialization of commodity markets on the profitability of strategies based on momentum and term structure. The performance of an array of portfolios from double-sorts on non-commercial traders’ participation, historical returns and term
- 5 years ago, 13 Apr 2015, 07:42pm -
Tactical Asset Allocation and Low Volatility Stocks [Alpha Architect]
Investing in strategies that exploit the low volatility anomaly have grown in popularity in recent years. While low volatility based strategies may or may not beat the return of a market cap weighted index, by construction, they will likely deliver significantly reduced volatility. This reduction in
- 5 years ago, 13 Apr 2015, 12:01pm -
Global participation broadening [@NautilusCap]
Global participation broadening
- 5 years ago, 13 Apr 2015, 12:01pm -
RUT Iron Condor - Dynamic Exit - 52 DTE - 20 Delta Continued [DTR Trading]
This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of 52 days-to-expiration (DTE) Iron Condors (IC), with 20 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs were
- 5 years ago, 13 Apr 2015, 12:01pm -
Understanding Dual, Relative, and Absolute Momentum [Dual Momentum]
Years ago when I first started studying momentum, two things stood out in my mind. The first was most momentum research focused on cross-sectional stock studies looking at the future performance of stocks that had been strong versus stocks that had been weak. This was what interested academics most,
- 5 years ago, 13 Apr 2015, 10:08am -
Does Smart Beta = Smart Asset Allocation? [Capital Spectator]
Most of the glowing analysis of so-called smart beta ETFs focuses on individual funds and how they offer advantages over their conventionally designed counterparts that weight securities by market capitalization—classic beta, as we’ll call them here. But what happens when we design portfolios
- 5 years ago, 13 Apr 2015, 10:07am -
Beware of Low Frequency Data [EP Chan]
(This post is based on the talk of the same title I gave at Quantopian's NYC conference which commenced at 3.14.15 9:26:54. Do these numbers remind you of something?)A correct backtest of a trading strategy requires accurate historical data. This isn't controversial. Historical data that
- 5 years ago, 13 Apr 2015, 04:30am -
Capital Recycling at Elevated Valuations: A Historical Simulation [Philosophical Economics]
Those who expect U.S. equities to deliver poor returns going forward can cite two compelling reasons in defense of their expectation: (1) Equity prices are significantly elevated relative to underlying earnings fundamentals. The S&P 500′s trailing price-to-earnings ratio, for example, is 20.5
- 5 years ago, 12 Apr 2015, 11:10pm -
The Small Cap Premium: Where is the beef? [Musings on Markets]
For decades, analysts and investor have bought into the idea of a small cap premium, i.e., that stocks with low market capitalizations can be expected to earn higher returns than stocks with higher market capitalizations. For investors, this has led to the pursuit of small cap stocks and funds for
- 5 years ago, 11 Apr 2015, 08:41pm -
Dual Momentum Update [Scott's Investments]
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 Strategy for
- 5 years ago, 11 Apr 2015, 10:18am -
RUT Iron Condor - Dynamic Exit - 52 DTE - 20 Delta [DTR Trading]
In this post we will look at the backtest results for dynamic exits of 52 days-to-expiration (DTE) Iron Condors (IC), with 20 delta short strikes, with different profit and loss exits. This is a non-directional options trading strategy that seeks to profit from a market that stays within a range
- 5 years ago, 11 Apr 2015, 10:18am -
Daily Academic Alpha: Financial Crisis Theory [Alpha Architect]
This paper develops a theory that explains why financial crises follow profitable lending booms. When agents exhibit the "availability heuristic" and there is a long period of banking profitability, all agents — banks, their investors and regulators — end up in an “availability
- 5 years ago, 10 Apr 2015, 11:10am -
US shift into High Beta? [@NautilusCap]
US shift into High Beta ?
- 5 years ago, 10 Apr 2015, 11:10am -
Global momentum continues... MSCI All World Index [@NautilusCap]
Global momentum continues... MSCI All World Index
- 5 years ago, 10 Apr 2015, 11:09am -
Lazy Evaluation in Finance [John Orford]
You have the coding chops to automate your job; savvy to communicate a new easier solution to your client; or come up with that smart equation which neatly cuts through the bullshit. You're smart enough not to have to work needlessly hard. There's an idea in computer science call
- 5 years ago, 10 Apr 2015, 12:57am -
New Book from Trader Edge: Exploiting Earnings Volatility: An Innovative New Approach to Evaluating, Optimizing, and Trading Option Strategies to Profit from Earnings Announce
Exploiting Earnings Volatility introduces an innovative new framework for evaluating, optimizing, and trading option strategies to profit from earnings-related pricing anomalies. Leveraging his extensive background in option-pricing and decades of experience in investment management and trading,
- 5 years ago, 9 Apr 2015, 08:20pm -
A Guide to Creating Your Own Smart Beta Fund [EconomPic]
FT tries to define smart beta: Smart beta is a rather elusive term in modern finance. It lacks a strict definition and is also sometimes known as advanced beta, alternative beta or strategy indices. It can be understood as an umbrella term for rules based investment strategies that do not use the
- 5 years ago, 9 Apr 2015, 08:17pm -
Fast Walsh–Hadamard Transform in Python [Quant at Risk]
I felt myself a bit unsatisfied after my last post on Walsh–Hadamard Transform and Tests for Randomness of Financial Return-Series leaving you all with a slow version of Walsh–Hadamard Transform (WHT). Someone wise once said: in order to become a champion, you need to flight one round longer. So
- 5 years ago, 9 Apr 2015, 11:46am -
RUT Iron Condor - Dynamic Exit - 52 DTE - 16 Delta Continued [DTR Trading]
This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of 52 days-to-expiration (DTE) Iron Condors (IC), with 16 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs were
- 5 years ago, 9 Apr 2015, 11:45am -
Dividend Champion Portfolio April Update [Scott's Investments]
The High Yield Dividend Champion Portfolio is a publicly tracked stock portfolio on Scott’s Investments. Its goal is to capture quality high yield stocks with a history of raising dividends. The screening process for this portfolio starts with the “Dividend Champions” as compiled by DRIP
- 5 years ago, 9 Apr 2015, 02:39am -
How to Trade the MACD Part 2: A High-level Analysis of the MACD Histogram Feature [Inovance]
In our last article, we investigated the MACD Line feature of the MACD and the historical patterns over the past few years using three common indicator settings. In this article, we are going to continue that analysis by studying the MACD Histogram, a feature that was added to the MACD indicator in
- 5 years ago, 8 Apr 2015, 08:09pm -
The Alcoa Barometer $SPY [@NautilusCap]
The Alcoa Barometer $SPY
- 5 years ago, 8 Apr 2015, 08:09pm -
Are you losing when you should be winning? Here's something you might be missing [Adam H Grimes]
Most people think about where to get into and out of positions. Most traders know how important it is to follow their rules, and most traders are always working toward being more disciplined. These are important pieces of a successful investment strategy, and most traders work on these things. But
- 5 years ago, 8 Apr 2015, 08:08pm -