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Quantocracy’s Daily Wrap for 01/30/2019

This is a summary of links featured on Quantocracy on Wednesday, 01/30/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • SPY TLT Rotation [Alvarez Quant Trading]

    For my retirement accounts, I like to trade ETF strategies that require little work. One strategy we have all seen is the SPY/TLT strategy. There are many flavors of this concept. Some pick the best one over the last N months. Then there are different ways of allocating a portion of the portfolio to each. I currently dont trade any SPY/TLT strategy and wanted to see if there was something
  • Can a Machine Learning Model Predict the SP500 by Looking at Candlesticks? [Mario Filho]

    Candlestick chart patterns are one of the most widely known techniques that claim to predict the market direction inside technical analysis circles. The development of this technique goes back to 18th century Japan, and its attributed to a Japanese rice trader. It consists of finding patterns based on charts made of the above figure with prices over a period of time. There are many
  • Marcos Lopez de Prado named 2019 Quant of the Year by Journal of Portfolio Management [Mathematical Investor]

    Marcos Lopez de Prado, a member of Mathematicians Against Fraudulent Financial and Investment Advice (MAFFIA), has been named 2019 Quant of the Year by Journal of Portfolio Management. Here are some excerpts from their press release: The Journal of Portfolio Management (JPM) has named Marcos Lopez de Prado 2019 Quant of the Year. JPM has instituted the annual Quant of the Year
  • Where is the Value? [Factor Investor]

    Investors always want to know whats cheapcheap relative to the opportunity set and relative to history. Cheapness could refer to any number of thingsprice relative to trailing twelve months earnings, to trailing earnings over multiple years, to analyst earnings estimates, to long-run projections, or a dozen other variations based on sales, cash flows, book value, etc. Because analyst

Quantocracy’s Daily Wrap for 01/29/2019

This is a summary of links featured on Quantocracy on Tuesday, 01/29/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • A Growing List of Long-Run Factor Studies [Two Centuries Investments]

    While there exists a well-established (at least a century-old) academic interest in the long-run properties of asset class returns like the U.S. Equity, Fixed Income, Commodity and Real Estate Markets, only during the past decade, has there emerged a branch of literature studying the cross-sectional factors like price momentum and value, as well as other effects like trend and volatility over the
  • Why Waiting Until The Announcement Is A Tough Way To Trade The Fed [Quantifiable Edges]

    Wednesday is a Fed Day a day in which the Federal Reserve concludes their scheduled meeting and releases a policy statement. Fed Days have historically shown a bullish inclination (up until Powell took over last year, as I showed on Sunday). One interesting aspect of Fed Days that I covered in the book is that the bullish inclinations have basically played out prior to the actual Fed

Quantocracy’s Daily Wrap for 01/28/2019

This is a summary of links featured on Quantocracy on Monday, 01/28/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Tightening the Uncertain Payout of Trend-Following [Flirting with Models]

    Long/flat trend-following strategies have historically delivered payout profiles similar to those of call options, with positive payouts for larger positive underlying asset returns and slightly negative payouts for near-zero or negative underlying returns. However, this functional relationship contains a fair amount of uncertainty for any given trend-following model and lookback period. In
  • HFT-like Trading Algorithm in 300 Lines of Code You Can Run Now [Alpaca]

    Commission Free Trading API Trading with commission free API opened up many interesting ideas. Lots of people liked the idea of trading stocks using Google Spreadsheet, and some people have been building their own Slack integrations. You can even build a robo advisor that automates longer-term investment strategies. Manage Your Stocks from Google Spreadsheet Using API You might think API trading
  • The Failure of Factor Investing was Predictable [Alpha Architect]

    In a recent ETF column, Allan Roth listed five investment lessons. While I agreed with much of what he wrote, one claimfactor investing has failed miserably called for examination of the facts. But first, a little background. William Sharpe, Jack Treynor and John Linter are typically given most of the credit for introducing the capital asset pricing model (CAPM). The CAPM was the first
  • Cross Validation in Machine Learning Trading Models [Quant Insti]

    The application of the machine learning models is to learn from the existing data and use that knowledge to predict the future unseen events. The model needs to be thoroughly tested and cross-validated to profitably trade in live trading. After reading this, you will be able to: Cross validate whether your model is good in predicting buy signal and/or sell signal Demonstrate the performance of
  • Value, Momentum and Carry Across Asset Classes [Factor Research]

    Cross-asset multi-factor exposure might be an attractive diversifier for an equity portfolio Factors share trends across asset classes, indicating common drivers However, relationships are time-varying, increasing complexity and risks INTRODUCTION There is a 72% probability of the San Franciso Bay Area getting hit by at least one earthquake of a magnitude of 6.7 or stronger between today and 2043
  • Last Chance for Early Bird Pricing: AI and Data Science in Trading Conference, NYC March 2019

    There is so much hype and confusion surrounding AI and alt data at the moment. The AI & Data Science in Trading conference separates the hype from the reality Professor David Hand, Imperial College, London Finding alpha has always required asset managers to raise the bar in terms of technology. Today, the combination of endless new data sources, cheap computing and new AI techniques

Quantocracy’s Daily Wrap for 01/27/2019

This is a summary of links featured on Quantocracy on Sunday, 01/27/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Value, Momentum & Carry Across Asset Classes [Alpha Architect]

    There is a 72% probability of the San Franciso Bay Area getting hit by at least one earthquake of a magnitude of 6.7 or stronger between today and 2043 according to the United States Geological Survey, which is a scientific agency of the U.S. government. An earthquake of that magnitude is likely to cause major damage in populated areas, especially if accompanied by a tsunami. Given high
  • R tips and tricks higher-order functions [Eran Raviv]

    A higher-order function is a function that takes one or more functions as arguments, and\or returns a function as its result. This can be super handy in programming when you want to tilt your code towards readability and still keep it concise. Consider the following code: # Generate some fake data > eps > x > y # Load libraries required > library(quantreg) > library(magrittr) >
  • Is Jerome Powell The Most Hated Fed Chairperson Ever? [Quantifiable Edges]

    Fed Days have a long history of showing a bullish tendency, and we have a large number of Fed Day studies to refer. For those that are unaware, a Fed Day is simply a day where the Federal Reserve completes a scheduled meeting and provides a policy announcement. Meetings typically take place 8 times per year, and in recent years the meetings have all been 2 days in length, with the 2nd day being
  • Compound Your Knowledge: Episode 2-ESOPs, Factors, Incentives [Alpha Architect]

    In todays video, we examine three posts. First, we examine ESOPs and 1042 QRP (qualified replacement property) with Doug Pugliese. Second, we examine a guest post by Nicolas Rabener examining Value, Momentum and Carry over the past 10 years. Last, we examine a guest post by Elisabetta discussing a new paper on rankings/incentives.

Quantocracy’s Daily Wrap for 01/24/2019

This is a summary of links featured on Quantocracy on Thursday, 01/24/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Right Now It s KDA Asset Allocation [QuantStrat TradeR]

    This post will introduce KDA Asset Allocation. KDA I.E. Kipnis Defensive Adaptive Asset Allocation is a combination of Wouter Kellers and TrendXplorers Defensive Asset Allocation, along with ReSolve Asset Managements Adaptive Asset Allocation. This is an asset allocation strategy with a profile unlike most tactical asset allocation strategies Ive seen before (namely, it barely
  • Algorithmically Detecting (and Trading) Technical Chart Patterns with Python [Alpaca]

    Defining Technical Chart Patterns Programmatically Ever wondered how to programmatically define technical patterns in price data? At the fundamental level, technical patterns come from local minimum and maximum points in price. From there, the technical patterns may be defined by relative comparisons in these min/max points. Lets see if we could have played this by algorithmically identifying
  • The Stay Rich Portfolio (or, How to Add 2% Yield to Your Savings Account) [Meb Faber]

    In 2012, Eike Batista had an estimated worth of more than $35 billion. The self-made Brazilian billionaire created an empire that stretched from mining to oil to public works. Many considered him the pride of Brazil. Barely two years later, he had lost all $35 billionand owed another $1.2 billion to creditors. How does this happen? How does a $35 billion portfolio evaporate practically

Quantocracy’s Daily Wrap for 01/23/2019

This is a summary of links featured on Quantocracy on Wednesday, 01/23/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Asset Allocation Roundup [Allocate Smartly]

    Six recent asset allocation articles (tactical or otherwise) that you might have missed: 1. Fragility Case Study: Dual Momentum GEM (Newfound) + Response from Gary Antonacci Coreys post kicked off quite a lively discussion. I encourage you to click through to both pieces, but heres the argument in a nutshell. Note: Corey is using Antonaccis Dual Momentum (GEM) to illustrate his point, but
  • The Efficient Market Hypothesis [Highly Evolved Vol]

    (This is an excerpt from my upcoming book on positional option trading.) The traders concept of the Efficient Market Hypothesis (EMH) is, making money is hard. This isnt wrong, but it is worth looking at the theory in more detail. Traders are trying to make money from the exceptions to the EMH, and the different types of inefficiencies should be understood, and hence traded,
  • Rankings and Risk-Taking in the Finance Industry [Alpha Architect]

    Rankings are everywhere in the finance industry. A number of papers identify bonus schemes and tournament incentives(1) among the main drivers of excessive risk-taking in developed nancial markets. The article studies the impact of rankings on professionals risk-taking investment decisions. The authors ask the following research questions: Do non-incentivized rankings and tournament

Quantocracy’s Daily Wrap for 01/22/2019

This is a summary of links featured on Quantocracy on Tuesday, 01/22/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Drawdowns and Portfolio Longevity [Flirting with Models]

    While retirement planning is often performed with Monte Carlo simulations, investors only experience a single path. Large or prolonged drawdowns early in retirement can have a significant impact upon the probability of success. We explore this idea by simulation returns of a 60/40 portfolio and measuring the probability of portfolio failure based upon a quantitative measure of risk called the
  • Corporate Debt In The Chinese Stock Market [Factor Research]

    China exhibits the worlds highest corporate debt as % of GDP However, Chinese stocks are not significantly more levered than U.S. stocks Asset and debt growth has stalled in 2018, likely indicating an economic slowdown INTRODUCTION The McKinsey Global Institute published an influential study in 2015 on the growth of global debt. The research note revealed that post the global financial crisis,

Quantocracy’s Daily Wrap for 01/19/2019

This is a summary of links featured on Quantocracy on Saturday, 01/19/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Drawdown control [SR SV]

    Containment of drawdowns and optimization of performance ratios for multi-asset portfolios is critical for trading strategies. Alas, short data series or structural changes often render estimates of covariance matrices unreliable. A popular solution is risk-parity with volatility targeting. An alternative is MinMax drawdown control, which builds on a broad interpretation of drawdowns as
  • Software engineering is as important as data science [Cuemacro]

    I end up tweeting a lot. Possibly, far too much of what I tweet is random, about burgers and so on, albeit with a modicum of tweets about markets and Python. Twitter inevitably acts like some sponge, absorbing your attention, which can often be a bad thing, but can actually also be a good thing. A lot of what I have learnt about markets and coding in recent years has been a result of seeing tweets

Quantocracy’s Daily Wrap for 01/18/2019

This is a summary of links featured on Quantocracy on Friday, 01/18/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Jack Bogle: The apostle of index investing [Mathematical Investor]

    Jack Bogle, founder of Vanguard Funds and a life-long apostle of index investing, died on 16 January 2019. Vanguard CEO Tim Buckley summarized his career in these terms: Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their childrens futures. J.C. de Swaan, lecturer at Princeton
  • Buyback Blackout Periods Do Not Negatively Impact Market Performance [Alpha Architect]

    The October 2018 market correction where the S&P 500 Index fell by 7%, its worst October since 2008,(1) left investors searching for a culprit. Some of the usual suspects were blamed rising geopolitical tensions ahead of the US midterms, the high likelihood of a slowdown in economic and earnings growth after the sugar rush of fiscal stimulus and tighter monetary policy leading to higher
  • Compound Your Knowledge: Episode 1 [Alpha Architect]

    Welcome to the newly re-titled weekly video, Compound Your Knowledge. In todays video, we examine three posts. First, we examine a simple analysis of 2018 Factor portfolio returns. Second, we examine a guest post by Jon Seed examining Warrens put options, and how they are different than most investors put options. Last, we examine a guest post by Tommi, discussing a new Fama and French
  • Whither Fragility? Dual Momentum GEM [Dual Momentum]

    Corey Hoffstein of Newfound Research recently wrote an article called, Fragility Case Study: Dual Momentum GEM. Corey starts out saying my dual momentum approach is the strategy he sees implemented the most among do-it-yourself tactical investors. Corey then said several investors bemoaned that GEM kept them invested in the stock market during the last quarter of 2018. It signaled them out

Quantocracy’s Daily Wrap for 01/17/2019

This is a summary of links featured on Quantocracy on Thursday, 01/17/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Livingston’s Muscular Portfolios [Allocate Smartly]

    This is a test of two tactical asset allocation strategies from Brian Livingstons new book Muscular Portfolios and his site MuscularPortfolios.com: the Mama Bear and Papa Bear Portfolios. The short and sweet take: neither of these strategies tread new ground theyre both based on the tried and true concept of relative (aka cross-sectional) momentum, and both are very