Quantocracy

Quant Blog Mashup

ST

Quantocracy’s Daily Wrap for 03/06/2018

This is a summary of links featured on Quantocracy on Tuesday, 03/06/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Thinking in Long/Short Portfolios [Flirting with Models]

    Few investors hold explicit shorts in their portfolio, but all active investors hold them We (re-)introduce the simple framework of thinking about an active portfolio as a combination of a passive benchmark plus a long/short portfolio. This decomposition provides greater clarity into the often confusing role of terms like active bets, active share, and active risk. We see that while active share
  • Macroeconomic factors and Tactical Asset Allocation [Alpha Architect]

    The literature shows that macroeconomic factors can drive asset returns, however, economists and investment teams operate independently. In this paper, the authors attempt to bring macroeconomic discipline to tactical asset allocation by highlighting macroeconomic dashboards: The authors suggest that a macroeconomic dashboard try and answer the following question: If an investor has a one
  • Cryptocurrencies with Python eBook: Apr 15 [Quant At Risk]

    It is my pleasure to deliver a long-awaited QaR ebook on the introduction to blockchain and cryptocurrencies with Python on April 15, 2018. In the book we will cover inter alia the fundamental aspects of blockchain in general; the craze around cryptocoins like Bitcoin, Ether, LiteCoin, etc.; their time-series analysis and statistical modeling using Python; key aspects of cryptocurrency risk

Quantocracy’s Daily Wrap for 03/05/2018

This is a summary of links featured on Quantocracy on Monday, 03/05/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Testing the Efficiente Index [Allocate Smartly]

    This test is based on the Efficiente Index from JP Morgan. A variation of this strategy is available via the ETF EFFE. The strategy uses traditional mean-variance optimization (aka the Efficient Frontier) to trade a broad basket of asset classes, but its actually a momentum strategy in disguise. The strategy hasnt generated huge returns, but it has had success managing losses, reducing
  • Dividend Yield Combinations [Factor Research]

    According to MorningStar assets under management of smart beta products breached $1 trillion in 2017 and more than half of the assets were invested in just three factors: Value, Growth and Dividend Yield. Naturally there is a significant amount of empirical evidence that suggests Value stocks generate positive excess returns across time, but much less evidence for the latter two factors. We

Quantocracy’s Daily Wrap for 03/03/2018

This is a summary of links featured on Quantocracy on Saturday, 03/03/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The New Short Volatility Instrument Landscape [QuantStrat TradeR]

    This post will discuss the consequences of ProShares decision to change the investment objective of SVXY, and possible alternatives that various investors can use to try and create an identical exposure if their strategy calls for such an instrument. So, to begin with, Proshares recently decided to make SVXY
  • Hidden Markov Modelling of Synthetic Periodic Time Series Data [Dekalog Blog]

    I am currently working on a method of predicting/projecting cyclic price action, based upon John Ehlers' sinewave indicator code, and to test it I am using Octave's implementation of a Hidden Markov model in the Octave statistics package hosted at Sourceforge. Basically I measure the dominant cycle period ( using either the above linked sinewave indicator code or autocorrelation
  • SPX Performance After Three 1% Down Days [Quantifiable Edges]

    Last night I looked at 3-day pullbacks a number of ways in relation to current market conditions. I thought blog readers might find the following interesting. I noted that SPX closed lower by greater than 1% for the 3rd day in a row on Thursday. In the past, that has often been followed by gains the next day. But times where is wasntwell, take a look at the chart below.

Quantocracy’s Daily Wrap for 03/01/2018

This is a summary of links featured on Quantocracy on Thursday, 03/01/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Tactical Asset Allocation in February [Allocate Smartly]

    This is a summary of the recent performance of a wide range of excellent tactical asset allocation strategies. These strategies are sourced from books, academic papers, and other publications. While we dont (yet) include every published TAA model, these strategies are broadly representative of the TAA space. Learn more about what we do or let AllocateSmartly help you follow these strategies in

Quantocracy’s Daily Wrap for 02/28/2018

This is a summary of links featured on Quantocracy on Wednesday, 02/28/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Excess VIX: A Predictive Volatility Model [Quant Fiction]

    The events of the past month, most notably the implosion of XIV, has focused public interest on volatility as an asset class. Theyve also illustrated that short vol as a strategy might be a little more risky than advertised (gasp!). The VIX is supposed to serve as a gauge of how much uncertainty exists in the market. For the long-form, math-heavy definition of this, the CBOE lays it out here.
  • Size and Value Factor Performance in Pakistan Stock Exchange [Azam Yahya]

    The main objective is to identify and understand cross-sectional patterns in expected stock returns in PSX(Pakistan Stock Exchange). Our reasons for doing so are simple. First, to effectively execute empirical asset pricing research, it is important to have a deep understanding of the characteristics of the sample and data being used. The main objective of this blog is to empirically investigate
  • XIV Barbell Strategy [Alvarez Quant Trading]

    Well that was fun! I have been telling my trading buddy and anyone else that would listen that I fully expected XIV to open at zero one day. Now I did not expect it to happen so soon or the way it did. I trade a strategy that can be long XIV or long VXX or in cash. Because of the very likely possibility of XIV blowing up, I had constructed my portfolio using ideas from the barbell portfolio and
  • Retail Short Sellers: Trading Skill or Insider Trading? [Alpha Architect]

    What are the research questions? This study uses a new classification system for informed vs. uninformed retail trades: short selling stocks without options available indicates more informed trading than short selling stocks with options available. Is there a difference in returns between shorted stocks without listed options and shorted stocks with listed options available? Using account level
  • Is a 4% Down Day a Black Swan? [Relative Value Arbitrage]

    wn Day a Black Swan? On February 5, the SP500 experienced a drop of 4% in a day. We ask ourselves the question: is a one-day 4% drop a common occurrence? The table below shows the number of 4% (or more) down days since 1970. 4% down 4% down and bullish From 1970 40 5 On average, a 4% down day occurred each 1.2 years, which is probably not a rare occurrence. We next counted the number of days when
  • A Two-Day SPY Pattern Suggesting A Bullish Edge For Wednesday [Quantifiable Edges]

    SPY gapped up and closed lower Tuesday after leaving an unfilled up gap on Monday. This triggered a simple study that I have examined a number of times over the years in the subscriber letter. The study can be found below. 2018-02-28 The numbers here all look solidly bullish, suggesting a potential 1-day upside edge. Traders may want to keep this in mind toda

Quantocracy’s Daily Wrap for 02/26/2018

This is a summary of links featured on Quantocracy on Monday, 02/26/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Diversification Dangers of DIY Tactical [Flirting with Models]

    After 2008, tactical ETF strategies rose in popularity. We often come across advisors who self-implement their own tactical strategies, using simple measures of momentum and trend. We believe that thoughtful implementation of tactical strategies requires admission that tactical choices will be wrong from time-to-time, and therefore advocate for the prudent use of diversification to manage
  • Factor Construction: Portfolio Rebalancing [Factor Research]

    Factor portfolios do not benefit significantly from intra-month rebalancing However, too infrequent rebalancing leads to lower risk-return ratios The robustness of factor performance at different rebalancing periods is one of the advantages of factor investing INTRODUCTION Creating factor portfolios requires investors to make a number of decisions regarding portfolio design and can be considered
  • The Negative Impact Of Friday s Low Volume [Quantifiable Edges]

    I mentioned in a Tweet on Friday that the low volume on Fridays rally was a bit concerning. The study below is one I featured in the subscriber letter this weekend. It examined other times substantial rallies occurred during uptrends on very light volume. 2018-02-25 Stats here suggest a downside edge. Perhaps not a huge edge, but in my view one that appears strong enough to warrant some

Quantocracy’s Daily Wrap for 02/25/2018

This is a summary of links featured on Quantocracy on Sunday, 02/25/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Algorithm design and correctness [Quantum Financier]

    Giving software you wrote access to your or your firms cash account is a scary thing. Making a mistake when manually executing a trade is bad enough when it happens (you can take my word for it if you havent yet), but when unintended transactions are made by a piece of software in a tight loop it has the potential to be an extinction event. In other words, there is no faster way to

Quantocracy’s Daily Wrap for 02/23/2018

This is a summary of links featured on Quantocracy on Friday, 02/23/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Asset Allocation Roundup [Allocate Smartly]

    Recent asset allocation articles (tactical or otherwise) that you might have missed: 40 Shades of Tactical Asset Allocation Across Bull And Bear Markets (Earl Adamy) Earl walks readers though his own approach to finding the best TAA strategies using the data available in our members area. We try not to define the best strategies for members, as the best is highly dependent on each
  • Are Factors Better and More Diversifying Than Asset Classes? [Alpha Architect]

    Factor investing promises outperformance at low cost. But to add value in a portfolio, it must deliver positive risk-adjusted returns and with low correlation to existing holdings. Historically, pure factor exposures have earned similar risk-adjusted returns to buying and holding plain vanilla asset classes like stocks and bonds. Therefore, factors such as Value and Momentum should only be

Quantocracy’s Daily Wrap for 02/22/2018

This is a summary of links featured on Quantocracy on Thursday, 02/22/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Algotopian [Backtrader]

    Following ideas, proposals, pushes and comments similar and disimilar to those, for example, in this post Community – What is the direction of backtrader, the last weeks have been used to craft an idea about the potential future of backtrader. It has been named Algotopian and its being shared today, for review, comments, feedback. First in this community (for which a Category will be opened),
  • Podcast: Managed Futures and Trend-Following with Dr. Kaminski [Alpha Architect]

    Here is a link to our podcast on Behind the Markets Wes and Jeremy chat with Katy Kaminski, Visiting Lecturer in Finance at the MIT Sloan School of Management and co-author of the book, Trend Following with Managed Futures: The Search for Crisis Alpha. They discuss trend following and managed futures. Katy also delves into going long and short based on the direction of the market and

Quantocracy’s Daily Wrap for 02/20/2018

This is a summary of links featured on Quantocracy on Tuesday, 02/20/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Creating a Table of Monthly Returns With R and a Volatility Trading Interview [QuantStrat TradeR]

    This post will cover two aspects: the first will be a function to convert daily returns into a table of monthly returns, complete with drawdowns and annual returns. The second will be an interview I had with David Lincoln (now on youtube) to talk about the events of Feb. 5, 2018, and my philosophy on volatility trading. So, to start off with, a function that I wrote thats supposed to mimic
  • How to Evaluate Multi-Asset Strategies [Alpha Architect]

    What are the research questions? Institutional Investors are increasingly allocating to multi-asset strategies (p.17 ) as they seek to access greater diversity, liquidity, and reduced volatility (survey results from Greenwich Associates, 2015). The main research questions of the paper are as follows: Is there ONE correct way to evaluate multi-asset strategies? Which are the most appropriate
  • Stress Testing an Intraday Strategy Through Monte Carlo Methods [Flare 9x]

    This is an intraday ES strategy that I was testing for a client. The client was not interested in it due to the low frequency of trades, hence I may post it for others to view. It shows how a strategy was proved through stress testing and looking for optimal conditions to apply the strategy. The steps for strategy development are below: Strategy Development Example Andrew Bannerman