Quant Mashup
Placing your first Forex trade with Python [Jon.IO]
Update: I updated the code so it works with Oanda's new API. Get it here Time to talk about brokers, how to place a trade programmatically and most importantly how not to get scammed. This is the third part of the series: How to build your own algotrading platform. A broker is nothing more than
- 4 hours ago, 12 Dec 2018, 09:45pm -
More examples in Financial Visualisation [Quant Dare]
In line with the previous post Group Funds with the Sun we continue exploring new ways to visualise and analyse financial data. We will take annual data from the current components of Dow Jones Industrial with data going back to 2000 to play around. Animated Risk – Return scatter Risk-Return
- 4 hours ago, 12 Dec 2018, 09:44pm -
The Mechanical Turk [Financial Hacker]
We can see thinking machines taking over more and more human tasks, such as car driving, Go playing, or financial trading. But sometimes it’s the other way around: humans take over jobs supposedly assigned to thinking machines. Such a job is commonly referred to as a Mechanical Turk in
- 1 day ago, 11 Dec 2018, 11:57am -
After a Lost Decade, Will Value Get its Groove back in 2019? [Alpha Architect]
Borne in academia and raised by fund managers seeking to outperform, value style mutual funds and ETFs today hold close to $2 trillion(1). But with poor returns over the past decade, the question of whether “value is dead” has become a popular topic of conversation.(2) The search term “is
- 1 day ago, 11 Dec 2018, 11:57am -
ETFs Have NOT Screwed Up Correlations, Liquidity, and Alpha Opportunities [Alpha Architect]
What are the Research Questions? The paper investigates the following research question: Have ETFs flows affected the correlation structure of returns? Have ETFs flows affected the liquidity of underlying securities? Have ETFs flows affected the ability of managers to generate alpha? What are the
- 1 day ago, 11 Dec 2018, 11:57am -
Using Metals to Trade Bonds [System Trader Success]
Sometimes things in the financial markets are pretty obvious if one is willing to see them. Despite all of the angst that has been exhausted since July of 2016 – when the S&P 500 Index broke out to a new all-time high – regarding the 2016 election, the economy, interest rates and the
- 1 day ago, 11 Dec 2018, 11:56am -
The Risk in the Risk-Free Rate [Flirting with Models]
The risk-free rate is an important concept in financial theory, but the risk-free rate accessible to most investors can vary significantly in level. The variation in risk-free rate not only has an important impact on the theoretically optimal portfolio, but it can have a very real impact upon
- 2 days ago, 10 Dec 2018, 09:45am -
Factor Optimisation [Factor Research]
Equity factors exhibit sector biases and exposures to other common factors A factor optimisation process allows investors to create pure factors Risk-adjusted returns do not increase, but pure factors are attractive from analytical, risk and allocation perspectives INTRODUCTION When large quantities
- 2 days ago, 10 Dec 2018, 09:44am -
Commodity carry [SR SV]
Across assets, carry is defined as return for unchanged prices and is calculated based on the difference between spot and futures prices (view post here). Unlike other markets, commodity futures curves are segmented by obstacles to intertemporal arbitrage. The costlier the storage, the greater is
- 2 days ago, 10 Dec 2018, 09:44am -
Is there a signal in the noise? Yield Curves, Economic Growth and Stock Prices [Musings on Markets]
The title of this post is not original and draws from Nate Silver's book on why so many predictions in politics, sports and economics fail. It reflects the skepticism with which I view many 'can't fail" predictors of economic growth or stock markets, since they tend to have
- 5 days ago, 7 Dec 2018, 08:36pm -
Portfolio construction through handcrafting: The method [Investment Idiocy]
This post is all about handcrafting; a method for doing portfolio construction which human beings can do without computing power (although realistically you'd probably need a spreadsheet unless you're some kind of weird masochist). The method aims to achieve the following goals: Humans can
- 5 days ago, 7 Dec 2018, 12:42pm -
Trend Following on Steroids [Alpha Architect]
Trend following is well-known and the simplest version is as follows: you buy an asset when it has positive momentum (the price goes up) and you sell it and go to cash (or any other safe haven) when the momentum turns negative.(1) The best-known example of trend following is on the monthly ETF SPY
- 5 days ago, 7 Dec 2018, 12:41pm -
90 Years Of Death Crosses [Quantifiable Edges]
The SPX could complete a “Death Cross” formation today or tomorrow, in which the 50-day moving average crosses below the 200-day moving average. In the past I have looked back to 1960 when examining Death Crosses. This time I decided to use Amibroker with my Norgate database, which goes back to
- 5 days ago, 7 Dec 2018, 12:41pm -
Weekly Recap: Trend-Following, Portfolios, and Risk Factors [Alpha Architect]
You can watch the video via the link below: This week Ryan and I discuss three posts. First, we examine a guest post titled, “Trend Following on Steroids,” which examines ways to enhance a simple trend-following strategy. Second, we examine a post I wrote regarding how to use trend-following
- 5 days ago, 7 Dec 2018, 12:41pm -
RNN, LSTM, GRU For Trading [Quant Insti]
In my previous article, we have developed a simple artificial neural network and predicted the stock price. However, in this article, we will use the power of RNN (Recurrent Neural Networks), LSTM (Short Term Memory networks) & GRU (Gated Recurrent Unit Network) and predict the stock price. We
- 6 days ago, 6 Dec 2018, 10:49am -
Portfolio construction through handcrafting: motivating [Investment Idiocy]
I've talked around a type of portfolio construction called "Handcrafting" for some time now, in both of my first two books, and in the odd blog post. I thought it would be useful to explain how the technique works in a more thorough and complete series of blog posts, and also share
- 1 week ago, 5 Dec 2018, 12:42pm -
The Emotional Quant Curve [Alvarez Quant Trading]
While writing my presentation for TradersFest 2018, I wanted to add the trader’s emotional curve. But looking at it closer, it did not capture my feelings as I go through the cycle of up and downs of trading a strategy. Here is my curve. I have been on every part of this curve multiple times.
- 1 week ago, 5 Dec 2018, 12:42pm -
MACD: Moving Average Convergence Divergence (Part 1) [Oxford Capital]
I. Trading Strategy Developer: Gerald Appel. Source: Appel, G. (2005). Technical Analysis. NJ: Pearson Education, Inc; Star, B., PhD (2016). Zero In On The MACD. Stocks & Commodities, May 2016. Concept: Trend following trading strategy based on the MACD (Moving Average Convergence Divergence)
- 1 week ago, 5 Dec 2018, 12:41pm -
A Portfolio of Leveraged Exchange Traded Funds vs. Benchmark Asset Allocation [Quantpedia]
A new interesting financial research paper gives an idea to build a diversified portfolio of leveraged ETFs (scaled down to have the same risk as a benchmark asset allocation built from a non-leveraged ETFs) to beat benchmark asset allocation. However, caution is needed as the most of the
- 1 week ago, 5 Dec 2018, 12:41pm -
How to Use Trend Following within a Portfolio [Alpha Architect]
A question we have been receiving recently is the following: How should I use trend following within a portfolio? Generally, the questions are related to our Global Value, Momentum, and Trend Index, which allocates to the (1) Value, (2) Momentum, and (3) Trend factors. A big difference between the
- 1 week ago, 4 Dec 2018, 12:24pm -
GARCH and a rudimentary application to Vol Trading [QuantStrat TradeR]
This post will review Kris Boudt’s datacamp course, along with introducing some concepts from it, discuss GARCH, present an application of it to volatility trading strategies, and a somewhat more general review of datacamp. So, recently, Kris Boudt, one of the highest-ranking individuals pn the
- 1 week ago, 3 Dec 2018, 11:16pm -
The relationship between ATR and standard deviation [Investment Idiocy]
Let's begin this post with a gross generalisation: Professional traders tend to measure risk and target risk using standard deviation. Amateur traders tend to use a funky little number called the ATR: 'Average True Range'. Both try and achieve the same aim: summarise the typical
- 1 week ago, 3 Dec 2018, 11:39am -
Maximizing Diversification [Flirting with Models]
Diversification within a portfolio can be quantified using the diversification ratio, which measures how much the volatility is reduced relative to a scenario where all assets are perfectly correlated. By maximizing the diversification ratio, we can construct the most diversified portfolio for a
- 1 week ago, 3 Dec 2018, 11:38am -
Measuring Factor Exposures: Uses and Abuses [Alpha Architect]
What are the research questions? USES: Can investors really separate “alpha” from “beta”? What are the ins-and-outs of understanding the exposures in a portfolio and their contribution to “alpha”? ABUSES: Are there differences in the way strategies are constructed in academic articles
- 1 week ago, 3 Dec 2018, 11:38am -
Private Equity: The Emperor Has No Clothes [Factor Research]
This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. SUMMARY Private equity returns can be replicated with small cap equities Small, cheap and levered stocks would have achieved higher returns since 1988 Valuation and debt multiples are
- 1 week ago, 3 Dec 2018, 09:50am -
Free Data and the Collapse of Trading Costs [CXO Advisory]
How have costs of U.S. stock trading data evolved in recent years? In his October 2018 paper entitled “Retail Investors Get a Sweet Deal: The Cost of a SIP of Stock Market Data”, James Angel examines costs of U.S. stock market data. He also describes the production of these data and their
- 1 week ago, 3 Dec 2018, 09:49am -
Tactical Asset Allocation in November [Allocate Smartly]
This is a summary of the recent performance of a wide range of excellent tactical asset allocation strategies, net of transaction costs. These strategies are sourced from books, academic papers, and other publications. While we don’t (yet) include every published TAA model, these strategies are
- 1 week ago, 1 Dec 2018, 12:31pm -
Listen to the whole quant album [Cuemacro]
It’s 50 years since the Beatles released the White Album. To celebrate it has been reissued with new mixes of the original tracks. I have to admit, it’s rarer these days to listen to an album the whole way through. Instead, I invariably listen to playlists on iTunes which select tracks from all
- 1 week ago, 1 Dec 2018, 12:31pm -
Understanding the correlation of equity and bond returns [SR SV]
The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates. This correlation has turned from positive in the 1970s-1990s to negative in the 2000s-2010s, on the back of similar shifts in the correlation between
- 1 week ago, 1 Dec 2018, 08:39am -
Research Review | 30 November 2018 | Risk Factors [Capital Spectator]
Factor Investing: Get Your Exposures Right! François Soupé (BNP Paribas Asset Management), et al. October 26, 2018 This paper is devoted to the question of optimal portfolio construction for equity factor investing. The first part of the paper focusses on how to make sure that a given equity
- 1 week ago, 30 Nov 2018, 09:40am -
Stiffness Indicator Analysis [Alvarez Quant Trading]
A reader pointed me the November 2018 issue of Technical Analysis of Stocks & Commodities to an article about a trend following indicator on S&P500 stocks. I liked the concept of the indicator and the article had backteted results and AmiBroker code. How could I resist not looking into this?
- 2 weeks ago, 28 Nov 2018, 09:33pm -
Deep Reinforcement Trading [Quant Dare]
Deep Reinforcement Learning applications in finance are still largely unknown. Nonetheless, recent developments in other fields have pushed researchers towards exciting new horizons. I believe that there is a huge potential for Reinforcement Learning in finance. As investment guru Ray Dalio, founder
- 2 weeks ago, 28 Nov 2018, 09:33pm -
When SPX Closes Higher On Bad Breadth [Quantifiable Edges]
While the SPX closes higher on Tuesday, NYSE breadth was weak – both from an % Up Issues and % Up Volume standpoint. This triggered the study below from the Quantifinder. I also discussed it in last night’s subscriber letter. 2018-11-28-1 Here we see numbers suggesting a substantial bearish edge
- 2 weeks ago, 28 Nov 2018, 09:32pm -
Create own Recession Indicator using Mixture Models [Eran Raviv]
Broadly speaking, we can classify financial markets conditions into two categories: Bull and Bear. The first is a “todo bien” market, tranquil and generally upward sloping. The second describes a market with a downturn trend, usually more volatile. It is thought that those bull\bear terms
- 2 weeks ago, 27 Nov 2018, 09:31pm -
Tactical Statistical Arbitrage [Factor Research]
SUMMARY Statistical arbitrage behaves similarly across markets Volatility is the main performance driver Attractive strategy for diversifying an equity portfolio INTRODUCTION Strategies like Value or Momentum are like staples that deserve a permanent allocation in investors portfolios. In contrast,
- 2 weeks ago, 26 Nov 2018, 01:14pm -
A Proxy for the Unobservable Global Market Portfolio [Alpha Architect]
What are the Research Questions? The authors propose an estimation of the capital stock that involves all identifiable and measurable financial and nonfinancial assets in the world economy. This portfolio seeks to represent the so-called “Global Market Portfolio,” that all MBA students learn to
- 2 weeks ago, 26 Nov 2018, 01:13pm -
Maximising the potential of portfolios with Adam Butler of @InvestReSolve [Better System Trader]
With so much focus often on the actual trading strategies or investments, portfolio construction can sometimes become an afterthought… or not even considered. However, as we’re going to hear about today, portfolio construction and optimization has the potential for huge increases in wealth…
- 2 weeks ago, 25 Nov 2018, 09:22pm -
CDS term premia and exchange rates [SR SV]
The term structure of sovereign credit default swaps (CDS) is indicative of country-specific financial shocks, because rising country risk affects short-dated maturities more than longer-dated ones. This feature allows disentangling global and local risk factors in sovereign CDS markets. The latter
- 2 weeks ago, 25 Nov 2018, 09:21pm -
Is trend following dead? [Investment Idiocy]
I get asked this question at least once a week. As those of you that have met me IRL ('in real life') will know I have limited patience and I'm easily bored. I'm definitely bored of answering this question. This post is the last time I'll answer it. There are broadly two
- 2 weeks ago, 23 Nov 2018, 09:37pm -
Investment Strategy Development Coursework [CXO Advisory]
In a series of five presentation slide sets (Lectures 1-8 of 10) on “Advances in Financial Machine Learning”, Marcos Lopez de Prado provides part of Cornell University’s ORIE 5256 graduate course at the School of Engineering (“Special Topics in Financial Engineering V”). The course
- 2 weeks ago, 23 Nov 2018, 08:21am -
Queue Position Simulation [Systematic Edge]
First off, Happy Thanksgiving! If time permits in the coming months I’d like to explore more on how I look at High Frequency (HF) data. Hopefully along the way I can spark some new discussion and improve on my thought process. HFT strategy “simulation” is no easy task. I am referring to this
- 2 weeks ago, 22 Nov 2018, 06:44pm -
Decision Tree For Trading Using Python [Quant Insti]
Decision Trees, are a Machine Supervised Learning method used in Classification and Regression problems, also known as CART. Remember that a Classification problem tries to classify unknown elements into a class or category; the output always are categorical variables (i.e. yes/no, up/down,
- 2 weeks ago, 22 Nov 2018, 06:44pm -
Estimating the probability of something that never happened [Quant Dare]
Have you ever needed to estimate the probability of a rare event? So rare that you haven’t been able to encounter it in real data? Well, what if I told you that there exists a way to calculate a statistically correct approximation. Oh, and you won’t even need a calculator! Recently I have just
- 2 weeks ago, 22 Nov 2018, 06:43pm -
Directionally Right and Precisely Wrong [Flirting with Models]
Portfolio construction decisions tell us about more than just our objective: they tell us about our beliefs. In practice, our beliefs extend beyond views of returns, volatilities, and correlations; we also hold views about our ability to measure these concepts and our confidence in those measures.
- 3 weeks ago, 19 Nov 2018, 01:21pm -
Short volatility strategies are extensive and widespread [Alpha Architect]
Who are the buyers and sellers of volatility-contingent strategies? How extensive is volatility trading and put selling currently? Could a volatility “cascade” cause a crash across correlated asset classes? Are there mechanisms that might provide stabilization? What are the Academic Insights?
- 3 weeks ago, 19 Nov 2018, 01:21pm -
The Rise of Zombie Stocks [Factor Research]
This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY Zombie firms, where interest payments exceed operating profits, are on the rise Zombie stocks perform surprisingly well They are expensive, volatile stocks from diverse sectors
- 3 weeks ago, 19 Nov 2018, 08:38am -
Thanksgiving Week Seasonality – An Updated Look [Quantifiable Edges]
The time around Thanksgiving has shown some strong tendencies over the years – both bullish and bearish. I have discussed them a number of times over the years. In the updated table below I show SPX performance results based on the day of the week around Thanksgiving. The bottom row is the Monday
- 3 weeks ago, 19 Nov 2018, 08:38am -
Realistic volatility risk premia [SR SV]
The volatility risk premium compensates investors for taking volatility risk. Conceptually it is based on the difference between options-implied and expected realized volatility. In equity markets this premium should be positive in the long run and fluctuate overtime depending on the market’s
- 3 weeks ago, 19 Nov 2018, 08:37am -
Weekly Recap: Factors, Opportunity Zones, and HFs [Alpha Architect]
This week Ryan and I discuss three topics. First, we examine the returns to U.S. stock broken down by (1) size and (2) factors (mega-cap stocks were the place to invest over the last 5 years!). Second, we examine a post by Adam Tkaczuk on Opportunity Zones–a must read for those with low basis
- 3 weeks ago, 19 Nov 2018, 08:37am -
Asset Allocation Roundup [Allocate Smartly]
Recent asset allocation articles (tactical or otherwise) that you might have missed: When Simplicity Met Fragility (Newfound Research) Yes, yes, yes. A must read. “Research suggests that simple heuristics are often far more robust than more complicated, theoretically optimal solutions. Taken too
- 3 weeks ago, 16 Nov 2018, 10:37am -
