Quant Mashup
Best Links of the Last Two Weeks [Quantocracy]
The best quant mashup links for the two weeks ending Saturday, 05/28 as voted by our readers: A simple breakout trading rule (pysystemtrade) [Investment Idiocy] Some Impressions from R Finance 2016 [Revolutions] Most popular machine learning R packages [Eran Raviv] Exploring Extreme Asset Returns
- 7 years ago, 29 May 2016, 10:03pm -
Podcast: Tribute to Nelson Freeburg [Better System Trader]
Nelson Freeburg was the editor of Formula Research, a newsletter that developed systematic timing models for the stock, bond, and commodity markets. He was also a research consultant working with institutional money managers to design proprietary timing models. Nelson had been an active trader since
- 7 years ago, 29 May 2016, 09:48pm -
Reminiscences of R in Finance 2016 [Portfolio Probe]
When I announced R in Finance 2016 I talked about 2 days of conference and 50 speakers. I missed out the 3 days of sleep deprivation. But a pleasant 3 days of sleep deprivation it was — seeing old friends and making new ones. I’m not sure that Mother Mary believed me that in our house we still
- 7 years ago, 29 May 2016, 09:48pm -
Deep Dive into Overnight vs Intra Day Returns of S&P500 Sector ETFs [KKB Research]
This is from a talk I gave at r/finance 2016. To start, I define the Overnight Effect as buying at the close and selling at the open, and the intraday as buying at the open and selling at the close. I applied the above strategy using the 9 sector SPDRs and assuming 2bps roundtrip transaction cost.
- 7 years ago, 29 May 2016, 07:26am -
PDF from Artur Sepp: Gaining the Alpha Advantage in Vol Trading (h/t Quant News)
1. Present some empirical evidence for short volatility strategies and the cyclical pattern of their P&L: alpha in good times, beta in bad times 2. Introduce a factor model with risk-aversion to explain the risk-premium of short volatility strategies as a compensation to bear losses in bad
- 7 years ago, 28 May 2016, 07:07am -
Why Algo Traders Prefer Python [Quant Insti]
- 7 years ago, 28 May 2016, 07:01am -
Exploring Extreme Asset Returns [Quant Dare]
Tail or extreme assets returns have been extensively studied. In his amazing paper: “Empirical properties of assets returns: stylized facts and statistical issues”, Rama Cont provides a framework on statistical analysis of price variations in various types of financial markets. He presents
- 7 years ago, 27 May 2016, 07:49am -
Some Impressions from R Finance 2016 [Revolutions]
R / Finance 2016 lived up to expectations and provided the quality networking and learning experience that longtime participants have come to value. Eight years is a long time for a conference to keep its sparkle and pizzazz. But, the conference organizers and the UIC have managed to create a vibe
- 7 years ago, 26 May 2016, 07:57pm -
Updated Dual Momentum Test [Scott's Investments]
I frequently get asked for updated tests on various strategies. Using Portfolio123 I ran a backtest on a Dual Momentum strategy from 1/1/2007 – 5/25/2016. The strategy is updated on Scott’s Investments monthly, the most recent update is here. The strategy invests equally in one ETF from each of
- 7 years ago, 26 May 2016, 07:56pm -
ConnorsRSI Analysis [Alvarez Quant Trading]
A couple posts ago, I did the RSI Analysis. This post will focus on ConnorsRSI which I created while working for Larry Connors. When creating the indicator, the focus was on short-term mean-reversion results. We will look at that here but also how does it handle longer-term holds. Since I did not
- 7 years ago, 25 May 2016, 12:51pm -
Forecasting the VIX to Improve VIX-Derivatives Trading [Quantpedia]
Konstantinidi et. al. state in their broad survey of Volatility-Index forecasting: "The question whether the dynamics of implied volatility indices can be predicted has received little attention". The overall result of this and the quoted papers is: The VIX is too a very limited extend (R2
- 7 years ago, 25 May 2016, 10:57am -
A Candid Discussion with an Algorithmic Trader [Quant Insti]
The role of Algorithm in a person’s life is too substantial to be ignored. From a simple coffee-making machine to the music system in his car, from elevators to search engine like Google, all are governed by a set of logical instructions – Algorithms or Algos, which enable them to respond to a
- 7 years ago, 24 May 2016, 09:43am -
Seasonal Effects in Equity Markets [Jonathan Kinlay]
There are a plethora of seasonal anomalies documented in academic research. For equities these include the Halloween effect (“Sell in May”), January effect, turn-of-the-month effect, weekend effect and holiday effect. For example, Bouman and Jacobsen (2002) and Jacobsen and Visaltanachoti (2009)
- 7 years ago, 23 May 2016, 09:20am -
The Paradox of Active Management [Philosophical Economics]
In this piece, I’m going to introduce a simple market model, and then use the model to illustrate certain important concepts in the debate between active and passive management. Some of these concepts have already been discussed in prior pieces, others are going to be new to this piece. Consider,
- 7 years ago, 22 May 2016, 08:24pm -
Day of month effect on Bond Equity portfolio [Sanz Prophet]
In this post we will: Take a look at a simple, momentum based, monthly rebalanced Equity/Bond portfolio. Search for what has been the optimal dates in the month to rebalance such a portfolio. Each month we allocate to two ETFs: SPY and TLT. If SPY has outperformed TLT we rebalance to 60% SPY – 40%
- 7 years ago, 22 May 2016, 08:24pm -
Automatic Support/Resistance using ML [Largecap Trader]
I think an interesting application of ML could be generating the ‘features’ for inclusion in a trading algorithm, converting non-numerical data into numerical. For example, converting market sentiment or satellite imagery to count cars in a retailer’s parking lot. More examples here. I had
- 7 years ago, 22 May 2016, 08:23pm -
A simple breakout trading rule (pysystemtrade) [Investment Idiocy]
Breakout. Not the classic home arcade game, seen here in Atari 2600 version, but what happens when a market price breaks out of a trading range. The Atari 2600 version was built by Wozniak with help from Jobs exactly 40 years ago. Yes that Wozniak and Jobs. Source: wikipedia In this post I'll
- 7 years ago, 20 May 2016, 09:34am -
Behavioral Finance Strikes Again: Contrast Effects in Markets [Alpha Architect]
At this point, even hard core efficient market fans will likely admit that behavior can influence investment decisions. Humans aren’t robots. However, just because some investors exhibit bad behavior that doesn’t mean they can influence prices. As the story goes, smart investors are prepared to
- 7 years ago, 20 May 2016, 09:34am -
New Whitepaper: Why Tactical FIxed Income is Different [Flirting with Models]
We recently updated, expanded, and put a new face on a whitepaper we had written last year called, “Why Tactical Fixed Income is Different.” You can access the new paper here. In the original version, we looked at some of the reasons why a simple tactical strategy that commonly works in equities
- 7 years ago, 19 May 2016, 10:57am -
A Stunning New Finding: Return Seasonalities are Everywhere [Alpha Architect]
We’ve discussed return seasonalities in the past, especially as they pertain to our approach to momentum. Turns out seasonality effects aren’t confined to momentum — they are literally everywhere and they are incredibly strong. This paper will blow your mind once you let the results settle in
- 7 years ago, 18 May 2016, 08:57pm -
Which Institution Has The Best Asset Allocation Model? [Meb Faber]
If you’re like most investors, you’re asking the wrong questions. I was chatting with a group of advisors this week down in La Jolla and a question arose. I’ll paraphrase: “Meb, thanks for the talk. We get a steady stream of salespeople and consultants in here hawking their various asset
- 7 years ago, 18 May 2016, 08:56pm -
Optimising weights with costs (pysystemtrade) [Investment Idiocy]
In a previous post I showed you how to use my open source python backtesting package, pysystemtrade, to estimate forecast weights and instrument weights. At the time I hadn't included code to calculate costs. Now that has been remedied I thought I should also write some code to demonstrate the
- 7 years ago, 18 May 2016, 11:46am -
The State of Risk Management [Flirting with Models]
How effective is your method of managing portfolio risk? We compare and contrast different approaches – including fixed income, managed futures, low volatility equities, and tactical – to explore the relative protection they can deliver versus the return drag they can create.
- 7 years ago, 18 May 2016, 11:46am -
Machine Beats Human: Machine Learning in Forex [Jon.IO]
Machine learning and trading is a very interesting subject. It is also a subject where you can spend tons of time writing code and reading papers and then a kid can beat you while playing Mario Kart. In the nexts posts, we are going to talk about: Optimize entries and exits. This and only this could
- 7 years ago, 18 May 2016, 11:45am -
Can We Predict Forward Alternative Investment Performance? [EconomPic]
My friend Ben from A Wealth of Common Sense poses the interesting question, How Should Alternative Investments Be Benchmarked? Please go read his post for a number of interesting thoughts on that topic. In this post, rather than rehash his arguments, I'll go a different direction and will try
- 7 years ago, 17 May 2016, 09:13pm -
The Fine Art of Opening Range Breakout Trading [Milton FMR]
The goal of this research is to find various set-ups and exit strategies that could be used for trading the opening range breakouts. The time frames we will be looking at are 10min, 15min and 30min opening range breakouts. We will focus our attention on the very liquid futures markets in particular
- 7 years ago, 17 May 2016, 09:12pm -
Not so Simple: Valuations and Low Volatility Strategies [Alpha Architect]
Low volatility funds are everywhere. The reasons for their proliferation are clear: Who wouldn’t want to own something with the label “low volatility” and Recent performance has been great. Open the AUM floodgates! But perhaps not all is well in low volatility land. A recent snippet by Josh
- 7 years ago, 17 May 2016, 12:38pm -
Trading With Indices [Jonathan Kinlay]
In this post I want to discuss ways to make use of signals from relevant market indices in your trading. These signals can add value regardless of whether you trade algorithmically or manually. The techniques described here are one of the most widely applicable in the quantitative analyst's
- 7 years ago, 17 May 2016, 12:02pm -
Update on Attilio Meucci's The Checklist and ARPM Bootcamp / Code [Return and Risk]
Last week I organised for Attilio Meucci to give a webinar to members of CFA Singapore and NUS Risk Management Institute on an Introduction to “The Checklist” – Ten Steps for Advanced Risk and Portfolio Management. It served the dual-purpose of a professional development talk and marketing of
- 7 years ago, 17 May 2016, 12:02pm -
Giving Up on Recursive Sine Formula for Period Calculation [Dekalog Blog]
I have spent the last few weeks trying to get my recursive sine wave formula for period calculations to work, but try as I might I can only get it to do so under ideal theoretical conditions. Once any significant noise, trend or combination thereof is introduced the calculations explode and give
- 7 years ago, 17 May 2016, 11:59am -
Where Do All the Clicks Go? [Quantocracy]
It’s been about a year since we launched Quantocracy. Over that time, we’ve sent about 450,000 clickthroughs to sites in the quant community, and that doesn’t even include RSS, Twitter, StockTwits and Facebook. To all of the denizens of Quantocracy: a big mahalo, gracias, 謝謝 and thank you
- 7 years ago, 17 May 2016, 04:11am -
Most popular machine learning R packages [Eran Raviv]
The good thing about using open-source software is the community around it. There are very many R packages online, and recently CRAN package download logs were released. This means we can have a look at the number of downloads for each package, so to get a good feel for their relative popularity. I
- 7 years ago, 16 May 2016, 11:21am -
The asymmetry zone [Flirting with Models]
The math of losses is not a secret: as losses grow, the return required to hit breakeven grows asymmetrically. At losses below -15%, this relationship is nearly linear; at higher levels, the gap grows dramatically. By reducing the “capture ratio” of an investment approach, we can exploit this
- 7 years ago, 16 May 2016, 10:45am -
Best Links of the Week [Quantocracy]
The best quant mashup links for the week ending Saturday, 05/14 as voted by our readers: Machine learning for financial prediction: experimentation with Aronson’s latest work – part 2 [Robot Wealth] Deep Learning with Theano – Part 1: Logistic Regression [Quant Start] How To Compute Turnover
- 7 years ago, 16 May 2016, 03:19am -
The Smoother "PATH": PutWriting At the High [EconomPic]
The analysis presented below combines two separate frameworks that were previously outlined: Avoiding Bear Markets to Improve Risk-Adjusted Returns The Case for Put Writing / Further Improving PutWrite Performance The first post outlined how avoiding bear markets (by only holding equities when they
- 7 years ago, 16 May 2016, 02:12am -
Asset-Pricing Implications of Dimensional Analysis [Alex Chinco]
I have been trying to use dimensional analysis to understand asset-pricing problems. In many hard physical problems, it is possible to gain some insight about the functional form of the solution by examining the dimensions of the relevant input variables. In the canonical example of this brand of
- 7 years ago, 16 May 2016, 02:11am -
52 Pick-Up and factor investing [Factor Investor]
Remember 52 Pick-Up? A dubious sibling, usually older, would ask if you wanted to play a game while holding a deck of cards. Emphatically, you agree, only to be showered with the deck of playing cards and told to pick them up. Wikipedia in its infinite wisdom defines 52 pick up as "a game of
- 7 years ago, 14 May 2016, 08:24am -
How Portfolio Construction Affects Value Funds [Alpha Architect]
Value investing is an investment philosophy that has been extensively discussed and examined at least since the days of Ben Graham, who popularized it as a discipline in the 20s and 30s. While there are some who are dismissive of its advantages as a long-term strategy, the historical evidence is
- 7 years ago, 13 May 2016, 08:08pm -
Deep Learning with Theano - Part 1: Logistic Regression [Quant Start]
Over the last ten years the subject of deep learning has been one of the most discussed fields in machine learning and artificial intelligence. It has produced state-of-the-art results in areas as diverse as computer vision, image recognition, natural language processing and speech recognition.
- 7 years ago, 12 May 2016, 09:22am -
Heatmaps in R [Quant Finance Academy]
In exploratory data analysis, we often need to visualize our data in different formats, in order to gain more understanding about the numbers and the relationship between the parameters. One such wonderful and informative representation is the ‘Heatmap’, which is basically a colored image, the
- 7 years ago, 12 May 2016, 09:21am -
How To Compute Turnover With Return.Portfolio in R [QuantStrat TradeR]
This post will demonstrate how to take into account turnover when dealing with returns-based data using PerformanceAnalytics and the Return.Portfolio function in R. It will demonstrate this on a basic strategy on the nine sector SPDRs. So, first off, this is in response to a question posed by one
- 7 years ago, 11 May 2016, 07:00pm -
State of Trend Following in April [Au Tra Sy]
The state of trend following was negative last month, as it was in March. The index is now just above the zero-line for the year, back from nearly the +20% mark a month and a half ago. Please check below for more details. Detailed Results The figures for the month are: April return: -2.35% YTD
- 7 years ago, 11 May 2016, 11:10am -
Cliff Asness's (AQR) View on Factor Timing [Quantpedia]
Everyone seems to want to time factors. Often the first question after an initial discussion of factors is “ok, what’s the current outlook?” And the common answer, “the same as usual,” is often unsatisfying. There is powerful incentive to oversell timing ability. Factor investing is often
- 7 years ago, 11 May 2016, 11:10am -
Machine learning for financial prediction: experimentation with Aronson’s latest work - part 2 [Robot Wealth]
My first post on using machine learning for financial prediction took an in-depth look at various feature selection methods as a data pre-processing step in the quest to mine financial data for profitable patterns. I looked at various methods to identify predictive features including Maximal
- 7 years ago, 10 May 2016, 04:40am -
Motivation: Why Do I Blog? [Quantocracy]
Blogging is hard. Quant blogging is even harder. I sometimes hear from bloggers in our community that their motivation to blog has faded. Most begin writing with little expectation, just happy to take a break from crunching numbers to interact with actual humans. Sometimes that optimism wanes
- 7 years ago, 9 May 2016, 10:49pm -
Alternative Beta can be Great: But Beware of Data-Mining! [Alpha Architect]
We investigate the biases in the backtested performance of “alternative beta” strategies using a sample of 215 commercially promoted trading strategies across five asset classes. Our results lend support to the cautions in recent literature regarding backtest overfitting and lack of robustness
- 7 years ago, 9 May 2016, 07:30pm -
The two sources of outperformance [Flirting with Models]
This blog post is available for download here. Summary When a manager outperforms, it implies that other investors have underperformed. In understanding an investment process, we believe it is critical to understand the source of this outperformance to determine whether it is sustainable or not. We
- 7 years ago, 9 May 2016, 11:29am -
The Value of Active Management: A Journey Into Indexville [Philosophical Economics]
The increasing popularity of index investing forces us to ask the following questions: What necessary functions does active management perform in a financial system? What is the optimal amount of active management to have in such a system, to ensure that those functions are carried out? If the size
- 7 years ago, 8 May 2016, 08:52pm -
Some Further Notes on Market Timing [Jonathan Kinlay]
Almost at the very moment I published a post featuring some interesting research by Glabadanidis (“Market Timing With Moving Averages” (2015), International Review of Finance, Volume 15, Number 13, Pages 387-425 – see Yes, You Can Time the Market. How it Works, And Why), several readers wrote
- 7 years ago, 8 May 2016, 07:23pm -
Best Links of the Last Two Weeks [Quantocracy]
The best quant mashup links for the two weeks ending Saturday, 05/07 as voted by our readers: Get Rich Slowly [Financial Hacker] Backtesting Strategies with R (h/t Algotrading Reddit) [Tim Trice] Quantopian Paper About In vs Out-of-Sample Performance of Trading Algorithms [Quantpedia] The Impact of
- 7 years ago, 8 May 2016, 04:21am -