Quant Mashup
Behavioral Finance Strikes Again: Anchoring in Loan Markets [Alpha Architect]
This paper documents that the path of credit spreads since a firm's last loan influences the level at which it can currently borrow. If spreads have moved in the firm's favor (i.e., declined), it is charged a higher interest rate than justified by current fundamentals, and if spreads have
- 5 years ago, 8 Apr 2015, 11:59am -
New related paper to #12 - Pairs Trading with Stocks [Quantpedia]
Pairs trading is a well-acknowledged speculative investment strategy that is widely used in the financial markets, and distance method is the most commonly implemented pairs trading strategy by traders and hedge funds. However, this approach, which can be seen as a standard linear correlation
- 5 years ago, 8 Apr 2015, 11:59am -
Is Your Strategy Still Working? [Jonathan Kinlay]
One of the challenges faced by investment strategists is to assess whether a strategy is continuing to perform as it should. This applies whether it is a new strategy that has been backtested and is now being traded in production, or a strategy that has been live for a while. Fig 6All strategies
- 5 years ago, 8 Apr 2015, 09:49am -
Best of the Blogs - AI, machine learning, data mining, and big data [Automated Trader]
Artificial intelligence, machine learning, data mining and big data seem to get thrown around in everything from business intelligence to financial services. Artificial intelligence is used where machine learning should be and machine learning is often confused with data mining. In this post Justin
- 5 years ago, 8 Apr 2015, 07:19am -
Interviewing the Quants: Dan of Theta Trend [Godel's Market]
Welcome back to Interviewing the Quants. This is the third interview in the series. Many of you might know our guest from his blog on simple objective options trading. It is called Theta Trend. His name is Dan. He's provided some information to give us some insight into who he is, what he does,
- 5 years ago, 8 Apr 2015, 06:04am -
Random walks down Wall Street - Stochastic Processes in Python [Stuart Reid]
I am still working on the final part of my real GDP growth series. In the meantime, I have written this article about some of the popular stochastic processes used by quants. This article was written with the help of a fellow quant and friend, Wilson Mongwe. I recommend reading his more detailed
- 5 years ago, 8 Apr 2015, 03:31am -
Post-Apocalyptic Geometric Returns [John Orford]
Following up on the 'Nuke Geometric Returns' post I tried sketch out possible equations for the variance of geometric returns. I got good looking numerical answers, but the formula looked very odd. Then spent a few hours searching for the answer with Google. Thankfully Gordon at Quant
- 5 years ago, 8 Apr 2015, 03:13am -
The Logical Invest Enhanced Bond Rotation Strategy (And the Importance of Dividends) [QuantStrat TradeR]
This post will display my implementation of the Logical Invest Enhanced Bond Rotation strategy. This is a strategy that indeed does work, but is dependent on reinvesting dividends, as bonds pay coupons, which means bond ETFs do likewise. The strategy is fairly simple — using four separate fixed
- 5 years ago, 8 Apr 2015, 02:05am -
Is Simpler Better? Quantopian tests the Acquirer’s Multiple and Joel Greenblatt’s Magic Formula [Greenbackd]
Josh Payne and the folks at Quantopian ran some tests on the performance of the acquirer’s multiple and Joel Greenblatt’s Magic Formula. I have argued in Deep Value and Quantitative Value that the acquirer’s multiple (enterprise value / operating earnings) tends to outperform the better known
- 5 years ago, 7 Apr 2015, 08:53pm -
Sustainable uptrend in EM, or another false start? $EEM [@NautilusCap]
Sustainable uptrend in EM, or another false start? $EEM
- 5 years ago, 7 Apr 2015, 08:52pm -
RUT Iron Condor - Dynamic Exit - 52 DTE - 16 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 16 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, 7 Apr 2015, 08:52pm -
Walsh–Hadamard Transform and Tests for Randomness of Financial Return-Series [Quant at Risk]
Randomness. A magic that happens behind the scene. An incomprehensible little blackbox that does the job for us. Quants. Many use it every day without thinking, without considering how those beautifully uniformly distributed numbers are drawn?! Why so fast? Why so random? Is randomness a byproduct
- 5 years ago, 6 Apr 2015, 08:17pm -
Transports divergence major warning sign? [@NautilusCap]
Transports divergence major warning sign?
- 5 years ago, 6 Apr 2015, 08:17pm -
Tax-Efficient Investing: How Should We Invest in Treasury Bonds? [Alpha Architect]
We investigate various methods to express a 10-Year Treasury Bond allocation. The primary issue with Treasury Bonds is their lack of tax-efficiency. T-bond income (and CPI adjustments in the case of TIPS) are taxed as ordinary income--ouch! A 2.5% yield is pretty bad, but a 1.25% after-tax yield
- 5 years ago, 6 Apr 2015, 01:20pm -
Is there a Relationship Between the Economy and the U.S. Stock Market? [EconomPic]
Long story short... yes, there appears to be a relationship between economic growth and stock market performance within the U.S. (and developed world), but that relationship holds only over longer periods of time and does not hold for all countries (less developed countries often "divert"
- 5 years ago, 6 Apr 2015, 01:19pm -
The Logical Invest "Hell On Fire" Replication Attempt [QuantStrat TradeR]
It seems that some people at Logical Invest have caught whiff of some of the work I did in replicating Harry Long’s ideas. First off, for the record, I’ve actually done some work with Harry Long in private, and the strategies we’ve worked on together are definitely better than the strategies
- 5 years ago, 6 Apr 2015, 11:36am -
Value Investing in Quantopian: Comparing the Acquirer’s Multiple to the Magic Formula [Quantopian]
Karen has written about her experience starting up at Quantopian and learning about algorithmic investing. I’ve had a similar experience over the last 5 months. I came in as a product manager in November, without a lot experience in finance and immediately began working on our data business. With
- 5 years ago, 6 Apr 2015, 11:35am -
Monday When The Good Friday Employment Report Has Gone Bad [Quantifiable Edges]
The employment report was released at 8:30am on Friday and the reaction in the futures was not good. ES sold down over 20 points in the next 45 minutes before closing for the day. As of Monday morning it has not bounced much. So it appears we are about to see a sizable gap lower.. Since inception of
- 5 years ago, 6 Apr 2015, 08:34am -
Ivy Portfolio April Update [Scott's Investments]
My apologies for the delay in posting the end of month updates - travel plans made it difficult to post. However, this delay highlights the benefit of the spreadsheets provided on Scott’s Investments - the sheets auto update daily so you, the reader, is not dependent on my posts to deliver timely
- 5 years ago, 6 Apr 2015, 12:35am -
RUT Iron Condor - Dynamic Exit - 52 DTE - 12 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 12 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, 6 Apr 2015, 12:35am -
Factor Relative Momentum: surprising finding on ranking [RRSP Strategy]
A Value or Momentum portfolio is selected each month, based on the highest previous 12 month return (R). Data are from Ken French’s library from 1950 to 2015. I use the large momentum portfolio and small value portfolio (the HML anomaly … Continue reading
- 5 years ago, 5 Apr 2015, 10:32pm -
Quant Geek Weekend Finance Homework [Alpha Architect]
Recently Discovered Research You Might Have Missed: Back test a set of trading rules from 1870 to 2010 (Zakamulin) A comparison of investor sentiment indicators (The Behavioral Quant) The Nonlinear Price Dynamics of U.S. Equity ETFs (Caginalp, DeSantis and Sayrak)
- 5 years ago, 5 Apr 2015, 06:40am -
Nuke Geometric Returns [John Orford]
When I was a kid 'Chinese Torture' was known to be extremely subtle. For example, a victim would be tied up and a drop of water would be allowed to slowly drip on someone's forehead for days until they went insane. Terrifying. Of course, actual torture in Imperial China was subtley
- 5 years ago, 5 Apr 2015, 06:39am -
RUT Iron Condor - Dynamic Exit - 52 DTE - 12 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 12 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 in a range
- 5 years ago, 5 Apr 2015, 06:39am -
Review: Machine Learning An Algorithmic Perspective 2nd Edition [Intelligent Trading Tech]
I just wanted to briefly share some initial impressions of the 2nd edition of Stephen Marsland's very hands on text, "Machine Learning, An Algorithmic Perspective." Having been a big fan of the first, I requested a review copy from Dr. Marsland, and with his help, the publishers were
- 5 years ago, 3 Apr 2015, 07:18am -
State of Trend Following in March: Up-and-Down [Wisdom Trading]
March 2015: Trend Following UP +2.34% — YTD: +10.63% Last month was positive and allowed our index to break the double-digit barrier to close the first quarter with a strong performance. In a similar fashion to a typical trend following trade, the composite equity curve had a relatively big run-up
- 5 years ago, 2 Apr 2015, 09:12pm -
Risk Management Rules on Australian Equities [Alpha Architect]
A friend of the blog was inspired by our Robust Asset Allocation discussion, and conducted some backtests using our proposed risk management framework: 50% simple moving average rule (MA) 50% time series momentum rule (TSMOM) For naming convenience, we call our 50/50 approach ROBUST. Our friend
- 5 years ago, 2 Apr 2015, 12:03pm -
Coming soon... [Adam H Grimes]
Just a short note here as we head into the holiday weekend. I want to share a few updates and tell you about about some exciting new things that are coming very soon.2015-04-01_14-18-42 I will be launching a series of short publications soon–whitepaper and mini-book formats. The idea will be to be
- 5 years ago, 2 Apr 2015, 12:03pm -
Slowing US growth... $SPY [@NautilusCap]
Slowing US growth... $SPY
- 5 years ago, 2 Apr 2015, 12:03pm -
Is there an optimal time of the month to invest? [Quantlab.co.za]
Introduction Last week we explored the "best-day-of-the-week" theory and found no significant evidence to suggest that there is an optimal day of the week to trade. This week I'm going to test the theory that there is an optimal time of month to trade, and as you shall soon learn,
- 5 years ago, 2 Apr 2015, 12:02pm -
State of Trend Following in March [Au Tra Sy]
The index registered a new yearly high last month, with a nice uptrend until mid-month (nearing +10% YTD), before settling back to a lower level. The year-to-date performance is still well in the black. Please check below for more details. Detailed Results The figures for the month are: March
- 5 years ago, 2 Apr 2015, 11:42am -
Javascript & Quandl API Tutorial [John Orford]
Javascript is the future of financial analysis. Here's a quick tutorial about how to download data from Quandl and show it in the browser. I am using Chrome. Your mileage may vary with other browsers, not by much though. All the code is here. This first item on the agenda is to craft a Quandl
- 5 years ago, 2 Apr 2015, 07:14am -
A Few Notes on The 3% Signal [CXO Advisory]
In the introduction to his 2015 book entitled The 3% Signal: The Investing Technique that Will Change Your Life, author Jason Kelly states: “Ideas count for nothing; opinions are distractions. The only thing that matters is the price of an investment and whether it’s below a level indicating a
- 5 years ago, 2 Apr 2015, 06:00am -
[Podcast] Below the surface of algorithmic trading, and why you must understand the game from a macro perspective with Ilan Azbel [Chat With Traders]
With an involvement in trading since his early twenties, and a background in mathematics and computer programming, it was a natural progression that this weeks guest would adapt a completely algorithmic trading approach. My friends, I would like you to meet Ilan Azbel. Ilan joins us to discuss
- 5 years ago, 2 Apr 2015, 01:24am -
When The Employment Report Has Been Released On Good Friday [Quantifiable Edges]
One thing to be aware is that while the market is closed on Friday for Good Friday, the BLS will be releasing the employment report. This is only the 11th time since 1980 that this has happened. Below is a list of all previous instances along with their performance on Monday when the market was open
- 5 years ago, 2 Apr 2015, 01:10am -
How much can dual momentum increase your investment returns? [Quant Investing]
I am sure you have already heard of momentum but have you ever heard of dual momentum? Neither have I until I read a very interesting book by Gary Antonacci called Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk. About Gary Antonacci Gary Antonacci is an
- 5 years ago, 1 Apr 2015, 07:28pm -
Passover may be time to let your stocks go [Almanac Trader]
Some of you may remember the old saying on the Street, “Buy Rosh Hashanah, Sell Yom Kippur.” Though it had a good record at one time, it stopped working in the middle of the last century. It still gets tossed around every autumn when the “high holidays” are on the minds of traders as many of
- 5 years ago, 1 Apr 2015, 07:28pm -
Forbes Evaluates Ken Fisher’s Stock Picking [CXO Advisory]
Each year, Forbes calculates the performance of columnist recommendations assuming: (1) equal initial investments in each stock pick when published; (2) 1% trading friction for each purchase; and, (3) matching benchmark investments in the S&P 500 Index for each pick with no trading friction.
- 5 years ago, 1 Apr 2015, 12:00pm -
VIX Trading Strategies in March [Volatility Made Simple]
We’ve tested 23 simple strategies for trading VIX ETPs on this blog (separate and unrelated to our own strategy). And while I can’t speak for all traders, based on all of my readings both academic and in the blogosphere, the strategies we’ve tested are broadly representative of how the vast
- 5 years ago, 1 Apr 2015, 11:44am -
Where to Find Cool Academic Finance Research [Alpha Architect]
Over the past 10+ years I've cultivated a laundry list of websites associated with financial economics. My primary focus has been identifying sources for new ideas that are creative, unique, and have application in the real-world. Interestingly enough, none of the sources I've identified
- 5 years ago, 1 Apr 2015, 11:44am -
What I am reading: April 1, 2015 [Alvarez Quant Trading]
Recent articles that I found interesting and made me think. 99 Problems But A Backtest Ain’t One- “The first time one can actually realize how good (bad) his chosen backtesting solution is when the strategy is traded live. However I am always amazed how little some traders pay attention to how
- 5 years ago, 1 Apr 2015, 11:31am -
Daily Academic Alpha: Market Panics [Alpha Architect]
Using a new daily dataset for all stocks traded on the New York Stock Exchange, we study the impact of information asymmetry during the liquidity freeze and market run of October 1907 - one of the most severe financial crises of the 20th century. We estimate that the run on the market increased
- 5 years ago, 1 Apr 2015, 11:03am -
RUT Iron Condor - Dynamic Exit - 52 DTE - 8 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 8 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, 1 Apr 2015, 11:03am -
Q2 strong in Pre-Election Years $SPY [@NautilusCap]
Q2 strong in Pre-Election Years $SPY
- 5 years ago, 1 Apr 2015, 11:02am -
The Price of Fuel: How Bad Could It Get? [Exegetic Analytics]
The cost of fuel in South Africa (and I imagine pretty much everywhere else) is a contentious topic. It varies from month to month and, although it is clearly related to the price of crude oil and the exchange rate, various other forces play an influential role. According to the Department of Energy
- 5 years ago, 1 Apr 2015, 06:22am -
The Stock Market in April [UK Stock Market Almanac]
April is one of the most interesting months for investors. Why? Let’s start with the fact that for the past decades the two stand-out strong months for the market have been April and December – the two have been switching back and forth as the single strongest month. For the last few years it
- 5 years ago, 1 Apr 2015, 06:22am -
Warren Buffett on Investing [CXO Advisory]
Does Warren Buffett consistently keep Berkshire Hathaway in market-beating form? If so, how does he do it? In his annual letters to stockholders, he includes company performance and benchmark data and describes in general terms how he goes about investing. He sometimes shares his thoughts on the
- 5 years ago, 1 Apr 2015, 06:00am -
Next Quarter's S&P 500 Forecast [John Orford]
Forecasting. No quant likes to do it. It's what stock analysts do, clever people are above that sort of thing. In spite of (or perhaps due to a lower IQ) here's my forecast of the S&P 500 for the next quarter. The graph shows that there's about a 10% chance of the S&P 500
- 5 years ago, 1 Apr 2015, 04:11am -
New related paper to #5 - FX Carry Trade and #8 - FX Momentum [Quantpedia]
#5 - FX Carry Trade #8 - FX Momentum Authors: Olszweski, Zhou Title: Strategy diversification: Combining momentum and carry strategies within a foreign exchange portfolio Link: http://apps.olin.wustl.edu/faculty/zhou/O_Z_JHDF_2014.pdf Abstract: Hedge funds, such as managed futures, typically use two
- 5 years ago, 1 Apr 2015, 04:11am -
Absolute Momentum and Stock Momentum Strategies: Friends, not enemies [Alpha Architect]
There is sometimes confusion associated with so-called "momentum" strategies--we want to clear the muddy waters. We break momentum into two categories to differentiate between the different approaches to momentum: (1) Absolute, or time-series momentum: an asset classes' own past
- 5 years ago, 31 Mar 2015, 07:38pm -