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Quantocracy’s Daily Wrap for 05/24/2018

This is a summary of links featured on Quantocracy on Thursday, 05/24/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Trading the Equity Curve More Ideas [Alvarez Quant Trading]

    A couple posts ago, I looked at Trading the Equity Curve and found interesting results but nothing that made me decide this works for me. Using the equity curve to decide when to stop trading a strategy just sounds like it should work. But for me it is always about testing. I cannot count how often I thought an idea would help the results only to see them dramatically hurt them. Remember test
  • Using Quadratic Discriminant Analysis To Optimize An Intraday Momentum Strategy [Quant Insti]

    In this post, we will create an intraday momentum strategy and use QDA as a means of optimizing our strategy. Well begin by reviewing Linear Discriminant Analysis or LDA and how it is associated with QDA, gain an understanding of QDA and when we might implement this technique instead of Linear Discriminant Analysis. We will then create our intraday momentum strategy using data on the eMini

Quantocracy’s Daily Wrap for 05/23/2018

This is a summary of links featured on Quantocracy on Wednesday, 05/23/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Dimensions of Return [Factor Investor]

    There are three universal dimensions of return that drive the performance of all strategiesregardless of investment style or asset class: consistency, magnitude, and conviction. These dimensions serve as levers that can increase or decrease performance of any strategy. They also provide context for why portfolios are constructed in the manner that they are. This piece will attempt to create a
  • What to do with Underperforming Investments? Assessment via Bayesian Inference [Alpha Architect]

    Assume you made a decision to invest in an active strategy based on, say, a backtest of the underlying process (to be clear, active means NOT passive market-cap weight in my context). Over the next few years, you sit in the strategy watching it underperform the passive benchmark. You are a disciplined investor, so you dont want to dump something based on recent performance, but you also dont
  • Interesting Insights into Trend-Following Strategies [Quantpedia]

    Because of the adaptive nature of position sizing, trend-following strategies can generate the positive skewness of their returns, when infrequent large gains compensate overall for frequent small losses. Further, trend-followers can produce the positive convexity of their returns with respect to stock market indices, when large gains are realized during either very bearish or very bullish
  • Biclustering time series [Quant Dare]

    In this post, well take a brief look at biclustering algorithms. They reveal easily interpretable patterns in our data and give us more information about the links between observations and features than simpler clustering algorithms usually do. Weve already reviewed a number of non-supervised clustering algorithms that group subsets of observations that are similar to each other and differ

Quantocracy’s Daily Wrap for 05/21/2018

This is a summary of links featured on Quantocracy on Monday, 05/21/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • QuantMinds Lisbon 2018 [Cuemacro]

    Lisbon sits wedged between the Atlantic on the West and the river Tagus on the south. Its buildings seemingly tanned to deep pastel shades, reflect a sun, which seems forever present. Whilst is it the history of the city, which appears to greet the visitor at first, whether it the Tower of Belem, or monastery, in recent years Lisbon has embraced change. Fancy buildings such as the MAAT (Museum
  • Technical Analysis in the Chinese Stock Market: Does it Work? [Alpha Architect]

    The authors conduct a comprehensive analysis of five categories of technical trading rules (including channel break rules, filter rules, moving average rules, oscillator rules and support/resistance rules) using aggregate data from the Chinese stock market for the period 1997 to 2015. Do technical trading rules work in the Chinese stock market after mitigating the impact of data mining
  • Separating Ingredients and Recipe in Factor Investing [Flirting with Models]

    Portfolio construction is a lot like cooking. There are two equally important elements: the ingredients and the recipe. The ingredients are the signals that are used to select investments. The recipe is the set of rules used to transform those signals into portfolio allocations. In factor investing, the signals (e.g., value, momentum, carry) often get all the attention and the importance of the
  • Mean-Reversion Across Markets [Factor Research]

    Volatility spiked in the first quarter of 2018 when global stock markets declined, which was mainly due to concerns on proposed tariffs by the US government and rising interest rates. Since then markets recovered and volatility declined again, but higher interest rates are likely to have a negative impact on the global economy given record levels of public, corporate and consumer debt. Higher
  • Commodity pricing [SR SV]

    A new paper combines two key aspects of commodity pricing: [1] a rational pricing model based on the present value of future convenience yields of physical commodity holdings, and [2] the activity of financial investors in form of rational short-term trading and contrarian trading. Since convenience yields are related to the scarcity of a commodity and the value of inventories for production and

Quantocracy’s Daily Wrap for 05/17/2018

This is a summary of links featured on Quantocracy on Thursday, 05/17/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Explaining the Demand for Higher Beta Stocks [Alpha Architect]

    The Capital Asset Pricing Model (CAPM) indicates returns should go up linearly as beta increases (in other words, risk and return are positively related). However, as Ive previously discussed, the historical evidence demonstrates that, while the slope of the security market line is generally positive (higher-beta stocks provide higher returns than low-beta stocks), it is flatter than the CAPM
  • Is The Russell Breakout Likely To Spark A Rally In The SPX? [Quantifiable Edges]

    The new high in the Russell is notable, since it is the 1st major index to get there. But it does not necessarily mean the other indices will follow. In the study below I looked at SPX performance following instances of a fresh RUT breakout while SPX had still not broken out. 2018-05-17 Whether you are looking at % Profitable, Win/Loss Ratio, Profit Factor, or Avg Trade, the numbers here appear

Quantocracy’s Daily Wrap for 05/15/2018

This is a summary of links featured on Quantocracy on Tuesday, 05/15/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • 5 Cutting Edge Investment Research Articles [Alpha Architect]

    This years annual financial research geekfest, officially known as the American Finance Association Annual Meeting, assembles the worlds top-tier academic researchers to discuss their latest financial research. Source: Wess art studio and a photo by Daniel Cheung If you are looking to get a glimpse at hot off the press research, you can find no better place (although, our

Quantocracy’s Daily Wrap for 05/14/2018

This is a summary of links featured on Quantocracy on Monday, 05/14/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Alpha Momentum [Factor Research]

    Stocks can be ranked by alpha instead of stock returns Alpha Momentum generates a higher and more consistent performance than Price Momentum Momentum crashes are reduced significantly and risk-return ratios increase INTRODUCTION Alpha in finance is shrinking continuously as investors are getting better at analysing returns. When a fund manager beat his benchmark 30 years ago, investors likely
  • How to Benchmark Trend-Following [Flirting with Models]

    Benchmarking a trend-following strategy can be a difficult exercise in managing behavioral biases. While the natural tendency is often to benchmark equity trend-following to all-equities (e.g. the S&P 500), this does not accurately give the strategy credit for choosing to be invested when the market is going up. A 50/50 portfolio of equities and cash is generally an appropriate benchmark for
  • Giving Computers the Ability to Learn from Data [Golden Jumper]

    General concepts of Machine Learning 3 types of learning and basic terminology Supervised learning. Learn a model from labeled training data that allows us to predict future or unknown data. Supervised refers to a set of sample where desired output signals (labels) are already known. Eg spam filter Also known as classification tasks. Another subcategory is regression where the outcome signal
  • SPX Performance Based on SOMA Action During the Present QT Initiative [Quantifiable Edges]

    The Feds System Open Market Account (SOMA is the account at the Fed that contains all of its bond purchase holdings. Fed SOMA data going back to 2003 can be downloaded from the New York Feds website. Over this time, there has been a strong relationship between the changes in the SOMA and movement in the stock market. I detail this relationship in the recently released Fed-Based Quantifiable

Quantocracy’s Daily Wrap for 05/13/2018

This is a summary of links featured on Quantocracy on Sunday, 05/13/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Position Sizing for Practitioners – Part 2: Dealing with Drawdown [Quant Fiction]

    What does optimal mean, anyway? In the first part of this series, we discovered that the staked fraction of capital that yields the greatest compounded returns also yields a less-than-optimal level of drawdown. To realize the greatest return on capital, an investor in SPY since its inception should have used over 3x leverage to buy in. This would have yielded the greatest compounded rate of
  • Correlations and the market [Cuemacro]

    When I have a burger I feel better. I feel that there is some causation here, in particular because of Ive got lots of statistical data to justify this! However, in practice, if we look away from burgers and at finance, its a bit more difficult to answer the conundrum of causation versus correlation. If variables are correlated, does it imply causation? Its a topic which repeatedly comes

Quantocracy’s Daily Wrap for 05/12/2018

This is a summary of links featured on Quantocracy on Saturday, 05/12/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Using yield curve information for FX trading [SR SV]

    FX carry trading strategies only use short-term interest rates (and forward basis) as signal. Yet both theoretical and empirical research suggests that the whole relative yield curve contains important information on monetary policy and risk premia. In particular, the curvature of a yield curve indicates to some extent the speed of adjustment of the short rate towards a longer-term yield.

Quantocracy’s Daily Wrap for 05/09/2018

This is a summary of links featured on Quantocracy on Wednesday, 05/09/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Improving data diversity. Synthetic Financial Time Series Generator [Quant Dare]

    When dealing with data we (almost) always would like to have better and bigger sets. But if theres not enough historical data available to test a given algorithm or methodology, what can we do? Our answer has been: creating it. How? By developing our own Synthetic Financial Time Series Generator. Lets start using a metaphor to make our purpose clearer: imagine you are a researcher of such an
  • Introducing Fed-Based Quantifiable Edges for Stock Market Trading (Research Paper) [Quantifiable Edges]

    I have shown Fed-based studies here at Quantifiable Edges since inception in 2008. And since 2010 I have closely tracked SOMA movement and its influence on the market in the Quantifiable Edges subscriber letter. This has proven extremely valuable in my research and trading. Now, after years of Fed-related work, I have put together a detailed research paper: Fed-Based Quantifiable Edges for Stock
  • Seasonal Strategy on US Equities + Genovest tests Quantpedia strategy [Quantpedia]

    We revisit a series of popular anomalies: seasonal, announcement and momentum. We comment on statistical significance and persistence of these effects and propose useful investment strategies to incorporate this information. We investigate the creation of a seasonal anomaly and trend model composed of the Sell in May (SIM), Turn of the Month (TOM), Federal Open Market Committee pre-announcement

Quantocracy’s Daily Wrap for 05/07/2018

This is a summary of links featured on Quantocracy on Monday, 05/07/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Leverage and Trend Following [Flirting with Models]

    We typically discuss trend following in the context of risk management for investors looking to diversify their diversifiers. While we believe that trend following is most appropriate for investors concerned about sequence risk, levered trend following may have use for investors pursuing growth. In a simple back-test, a nave levered trend following considerable increases annualized returns and
  • Value Factor – Comparing Valuation Metrics [Factor Research]

    This research note was originally published at Alpha Architect. INTRODUCTION Mirror, mirror, on the wall which is the fairest of them all? Recent commentary (to include a recent Barrons article) seems to suggest that value is dead and may never come back. Of course, most of these comments revolve around the price-to-book valuation metric, which, as the Barrons article points out, might