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Quantocracy’s Daily Wrap for 04/29/2018

This is a summary of links featured on Quantocracy on Sunday, 04/29/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Economics, finance and pseudoscience [Mathematical Investor]

    Bloomberg columnist Mohamed El-Erian recently lamented that the discipline of economics is divorced from real-world relevance and has lost credibility. Among the problems he mentions currently afflicting the field are the following: The proliferation of simplifying assumptions that lead to an overreliance on excessively abstract estimation techniques and approaches. Insufficient
  • VIX Mean Reversion After a Volatility Spike [Relative Value Arbitrage]

    In a previous post, we showed that the spot volatility index, VIX, has a strong mean reverting tendency. In this follow-up installment were going to further investigate the mean reverting properties of the VIX. Our primary goal is to use this study in order to aid options traders in positioning and/or hedging their portfolios. To do so, we first calculate the returns of the VIX index. We then

Quantocracy’s Daily Wrap for 04/28/2018

This is a summary of links featured on Quantocracy on Saturday, 04/28/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Fixed income carry as trading signal [SR SV]

    Empirical evidence for 27 markets suggests that carry on interest rate swaps has been positively correlated with subsequent returns for the past two decades. Indeed, a nave strategy following carry as signal has produced respectable risk-adjusted returns. However, this positive past performance masks the fundamental flaw of the carry signal: it disregards the expected future drift in interest
  • Are Trend-Following and Time-Series Momentum Research Results Robust? [Alpha Architect]

    The authors discuss a variety of past research papers on time-series momentum but pay particular attention to the Moskowitz, Ooi, and Pedersen (MOP) 2012 JFE paper, Time Series Momentum. This paper is arguably the first paper in recent memory to crack the top-tier academic journals with a paper on trend-following, often considered by the current ivory tower establishment to be a shoddy

Quantocracy’s Daily Wrap for 04/26/2018

This is a summary of links featured on Quantocracy on Thursday, 04/26/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Diversification – What most novice investors miss about trend following [Invest ReSolve]

    In his 1998 second edition of Stocks for the Long Run1, Jeremy Siegel added a chapter called Technical Analysis and Investing with the Trend, where he explored simple trend rules to time the U.S. stock market. In the chapter, Dr. Siegel revealed that the simple trend following strategy produced similar returns to a strategy of buying the index and re-investing dividends over the very
  • The Costs of Implementing Momentum Strategies [Alpha Architect]

    There are now hundreds of factors in what John Cochrane famously called the zoo of factors. However, there are only a small number that meet the requirements for investment that my co-author, Andrew Berkin, and I establish in our book, Your Complete Guide to Factor-Based Investing: persistence, pervasiveness, robustness, implementability, and intuitiveness. Momentum (both
  • Backtesting Four Portfolio Optimization Strategies In R [Capital Spectator]

    Investing strategies run the gamut, but every portfolio shares a common goal: delivering optimal results. The catch is that theres a wide range of possibilities for defining optimal and so your mileage may vary, depending on preferences, assets, and other factors. Eran Raviv offers a useful review by comparing how four strategies with different portfolio-design strategies stack up via

Quantocracy’s Daily Wrap for 04/25/2018

This is a summary of links featured on Quantocracy on Wednesday, 04/25/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Exploring Alternative Price Bars [Black Arbs]

    This post explores a concept at the heart of quantitative financial research. Most qfin researchers utilize statistical techniques that require varying degrees of stationarity. As many of you are aware financial time series violate pretty much all the rules of stationarity and yet many researchers, including me, have applied or will apply techniques when not appropriate thereby calling into
  • Mean Reversion Entry Timing [Alvarez Quant Trading]

    One of the first tests I did when I got AmiBroker twenty years ago was a mean reversion test. It was a classic set up, a stock in an uptrend, followed by a pullback. But the entry differed from what I do now. The entry waited for a confirmation of the trend back up. The trade would enter when the stock crossed above the previous days high. The exit was also different. The exit was on a close
  • Crypto-asset Research Survey [CXO Advisory]

    What is the body of academic research on crypto-assets? In their March 2018 paper entitled Cryptocurrencies as a Financial Asset: A Systematic Analysis, Shaen Corbet, Brian Lucey, Andrew Urquhart and Larisa Yarovaya review available research on cryptocurrencies as financial assets. They define crypto-assets as peer-to-peer electronic transaction systems which allow payment by one party

Quantocracy’s Daily Wrap for 04/24/2018

This is a summary of links featured on Quantocracy on Tuesday, 04/24/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Keller Ratio: Finding the Best Strategy for an Investor’s Unique Risk Tolerance [Allocate Smartly]

    We wanted to take a moment to highlight a post from the always smart JW Keuning describing a novel approach for measuring how well a strategy has performed relative to drawdowns (losses): Presenting the Keller Ratio. Our preferred method for assessing a strategys return relative to drawdown has always been the Ulcer Performance Index, but the Keller Ratio offers the unique ability to adjust
  • The World’s Longest Multi-Asset Momentum Investing Backtest [Alpha Architect]

    As evidenced by the image below, interest in momentum research has taken off since the original 1993 Jegadeesh and Titman paper: Source: Two Centuries of Multi-Asset Momentum (Equities, Bonds, Currencies, Commodities, Sectors and Stocks) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2607730 Most of the research on momentum is repetitive and reaks of data torture, but Geczy and Samanov
  • Three-day Pullback Pattern Into Turnaround Tuesday Potentially Bullish [Quantifiable Edges]

    SPYs move lower over the last 3 days has set up a potential Turnaround Tuesday scenario. The fact that it made a lower high, lower low, and lower close for at least the 3rd day in a row triggered the following study. 2018-04-241 The numbers are impressive and the bounces couldnt get much more reliable. In all but two instances SPY has managed to bounce at some point in the next four
  • There Exist Two Different Accruals Anomalies [Quantpedia]

    We document that several well known asset-pricing implications of accruals differ for investment and non-investment-related components. Exposure to an investment-accruals factor explains the cross-section of returns better than the accruals themselves, and this factors returns are negatively predicted by sentiment. The opposite results hold for non-investment accruals. Further tests show cash

Quantocracy’s Daily Wrap for 04/23/2018

This is a summary of links featured on Quantocracy on Monday, 04/23/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Risk Ignition with Trend Following [Flirting with Models]

    While investors are often concerned about catastrophic risks, failing to allocate enough to risky assets can lead investors to fail slowly by not maintaining pace with inflation or supporting withdrawal rates. Historically, bonds have acted as the primary means of managing risk.However, historical evidence suggests that investors may carry around a significant allocation to fixed income only
  • Value Factor: Improving the Tax Efficiency [Factor Research]

    The tax efficiency of the Value factor can be improved by reducing exposure to dividend-yielding stocks Improving the tax efficiency reduces the performance in Europe and Japan, but not in the US Reducing turnover can be considered for minimising capital gains and stamp duty taxes INTRODUCTION Tax is not a particular exciting dinner party topic, but is highly relevant for net investor returns. A

Quantocracy’s Daily Wrap for 04/22/2018

This is a summary of links featured on Quantocracy on Sunday, 04/22/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Presenting the Keller Ratio [TrendXplorer]

    Many traditional return to risk measures are not apt for intuitive interpretation The Keller ratio is expressed as an adjusted return and therefore easy to interpret The Keller ratio allows for strategy selection optimally aligned with an investors risk appetite In our VAA-paper we introduced a new metric for assessing a portfolios equity line in terms of the reward to risk relationship:
  • Reversal Patterns: Part 1 | Trading Strategy (Exits) [Oxford Capital]

    Developer: Richard Wyckoff; Toby Crabel. Source: Crabel, T. (1990). Day Trading with Short Term Price Patterns and Opening Range Breakout. Greenville: Traders Press, Inc. Concept: Trading strategy based on reversal patterns. Research Goal: Performance verification of reversal patterns. Specification: Table 1. Results: Figure 1-2. Trade Setup: Long Setup: A price move below a Demand Pivot
  • A SPY Setup Suggesting A Short-Term Upside Edge [Quantifiable Edges]

    Fridays action caused SPY to close in an interesting position. Traders could look at the chart and say it is short-term oversold due to the fact that it closed at a 5-day low for the 1st time in a while. They might also say it is short-term overbought since it closed above its 10-day moving average. I have found that edges often arise when something is overdone in one timeframe, but

Quantocracy’s Daily Wrap for 04/21/2018

This is a summary of links featured on Quantocracy on Saturday, 04/21/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • R/Finance 2018 Registration [Foss Trading]

    This year marks the 10th anniversary of the R/Finance Conference! As in prior years, we expect more than 250 attendees from around the world. R users from industry, academia, and government will joining 50+ presenters covering all areas of finance with R. The conference will take place on June 1st and 2nd, at UIC in Chicago. You can find registration information on the conference website, or you

Quantocracy’s Daily Wrap for 04/19/2018

This is a summary of links featured on Quantocracy on Thursday, 04/19/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Why All My Books Are Now Free (aka A Lesson in Amazon Money Laundering) [Meb Faber]

    If youve been following me on Twitter you know that Ive finally had it with Amazon. There is a silver lining of course, and the good news for my readers is that all of my books are now free to download.(Sadly I cannot control the two I didnt self publish) If you care to understand why Im giving up a stream of income, here is a little background. Youve probably heard a lot in the

Quantocracy’s Daily Wrap for 04/18/2018

This is a summary of links featured on Quantocracy on Wednesday, 04/18/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Bond Investing: Reach for Safety [Alpha Architect]

    Yield. Within almost any asset class, investors want to know, what is the yield on the investment? For some investors, this is the most important and only screen used when sorting funds. Mutual fund companies have found ways to feed the beast by juicing the dividend yield on equity funds. In addition, investors make behavioral errors when assessing stocks by treating the dividend yield