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Quantocracy’s Daily Wrap for 11/03/2016

This is a summary of links featured on Quantocracy on Thursday, 11/03/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Risk of Low Volatility Strategies [Investing Research]

    Most factor-based, otherwise known as Smart Beta, ETF strategies are based on a single concept like value or momentum. Over the last two years, the largest flows have been to ETFs investing in low volatility stocks. The most popular being the iShares Edge MSCI Min Vol USA ETF (USMV), which as of September 30th had grown to $14.4bn USD, more than doubling over the last 12 months. With product
  • A Reversal-Based Trading Strategy Around Earnings Announcements [Quantpedia]

    This study documents that earnings announcements serve as a reality check on short-term, fear and greed driven price development: stocks with extreme abnormal returns in the week before an earnings announcement experience strong price reversal around the announcement. A trading strategy that exploits this reversal is profitable in 40 of the last 42 years and earns abnormal returns in excess of
  • Financial Time-Series Segmentation Based On Turning Points in Python [Quant at Risk]

    A determination of peaks and troughs for any financial time-series seems to be always in high demand, especially in algorithmic trading. A number of numerical methods can be found in the literature. The main problem exists when a smart differentiation between a local trend and global sentiment needs to be translated into computer language. In this short post, we fully refer to the

Quantocracy’s Daily Wrap for 11/02/2016

This is a summary of links featured on Quantocracy on Wednesday, 11/02/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Risk Parity and The Four Faces of Risk [GestaltU]

    Benjamin Graham famously said that "In the short run, the market is a voting machine but in the long run, it is a weighing machine." But this is not quite correct. Rather, in the short term, the market is a machine where investors "vote" about what the market will "weigh" in the future. Of course, when Benjamin Graham referred to "weighing," he was actually
  • Value Investing using Enterprise Multiples – Is the Premium Due to Risk and/or Mispricing? [Alpha Architect]

    At Alpha Architect, we are big fans of Value investing (and Momentum). In the past, Wes and I examined which valuation measure had the largest spread between Value and Growth firms. The evidence showed (updated results here) that Enterprise Multiples had the largest spread between Value and Growth firms. We define Enterprise Multiples as the Total Enterprise Value (TEV) of the firm divided by
  • Low Priced Stocks No Bargain [Larry Swedroe]

    As I wrote about last week, the absolute level of a firms stock price is arbitrary, as it can be easily manipulated by the firm through altering the number of shares outstanding (for example, by splitting the stock). Despite this obvious fact, the research into investor behavior has found a strong preference among individuals for low-priced stocks. For instance, the research shows that

Quantocracy’s Daily Wrap for 11/01/2016

This is a summary of links featured on Quantocracy on Tuesday, 11/01/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Tactical Asset Allocation in October [Allocate Smartly]

    This is a summary of the recent performance of a number 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. Read more about our backtests or let AllocateSmartly help you follow these strategies in

Quantocracy’s Daily Wrap for 10/31/2016

This is a summary of links featured on Quantocracy on Monday, 10/31/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Rising Correlations and Tactical Asset Allocation [Flirting with Models]

    The power of strategic asset allocation is best harnessed when future asset class behavior is relatively certain and diversification opportunities abound. Uncertainty around rising rates and the current monetary policy environment may call both of these criteria into question. Holding all else equal, tactical asset allocation (TAA) is most likely to add value in environments where
  • Demystifying the Hurst Exponent Part 1 [Robot Wealth]

    This is the first post in a two-part series about the Hurst Exponent. Tom and I worked on this series together, but the awesome code presented throughout is all his. Thanks Tom! Mean-reverting time series have long been a fruitful playground for quantitative traders. In fact, some of the biggest names in quant trading allegedly made their fortunes exploiting mean reversion of financial time series
  • The Rebalance Bonus for Value and Momentum Porfolios [Alpha Architect]

    A sophisticated DFA-focused advisor asked us to conduct some research on the following question: Are there additional portfolio diversification benefits to combining concentrated portfolios of value and momentum stocks relative to combining less concentrated portfolios of value and momentum stocks? In concrete terms, is combining a value fund with 300+ holdings (e.g., DFA Large Cap Value, DFLVX)

Quantocracy’s Daily Wrap for 10/30/2016

This is a summary of links featured on Quantocracy on Sunday, 10/30/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Foundations of Successful Trading with Howard Bandy [Better System Trader]

    There are a number of different aspects to trading that we really need to get a handle on to increase our odds of success. Some aspects we often put a lot of thought and analysis into, and others we may not consider so carefully or at all, which could be impacting our trading results without us even realizing. Todays guest, Dr Howard Bandy, is here to discuss the foundations of trading, and some

Quantocracy’s Daily Wrap for 10/26/2016

This is a summary of links featured on Quantocracy on Wednesday, 10/26/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • A Framework for a Short VIX Allocation [EconomPic]

    It has historically paid to be a seller of volatility for at least two reasons… 1) Volatility is typically overpriced relative to realized volatility The chart on the left shows the VIX index (predicted volatility) relative to the forward realized volatility of the S&P 500, while the chart on the right shows the variance between the two (anything > 0 means the VIX index was higher than
  • Interactive Brokers API in Docker [Ryan Kennedy]

    While Interactive Brokers provide arguably the most extensive retail-level API available for trading, the software is quite frustrating to work with. Rather than IB offering you an API endpoint on their server to interact with, you must run their Gateway or TWS program on your host and interact with this program, which acts as an intermediary server. Further, both of these programs are
  • VXX & XIV Strategies [Alvarez Quant Trading]

    My recent research has been on the volatility Exchange Traded Products. My focus has been on long trades using VXX and XIV. Although VXX has a very strong downtrend, I am not a fan of developing short strategies on it due to the huge upside risk. I wrote about XIV here and expressed some of the dangers of trading these ETFs. Issues XIV has an inception date of 11/30/2010 and VXX inception date is

Quantocracy’s Daily Wrap for 10/25/2016

This is a summary of links featured on Quantocracy on Tuesday, 10/25/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • How to Turn an Engineer into a Quantitative Investor [Alpha Architect]

    We receive multiple requests from readers looking to break into the finance industry. Quite often the reader is currently working in a traditional engineering job and looking to make a career switch. The question we often hear is How does an engineer become a quantitative finance geek? To answer this question we decided to ask someone who recently made the switchKris Longmore at newly
  • Is My Diversified Commodity Index Just Oil? [Flirting with Models]

    The benefit of including commodities in individual investor portfolios is often up for debate, focusing on aspects such as expected returns, volatility, access, and diversification. While we think that commodities can add value if the risks are understood, many passive ETFs that offer commodity exposure rely on indices that are significantly exposed to oil prices and energy, in general. One
  • Strategic and Equal Weighted ETF Portfolios in QSTrader [Quant Start]

    In a previous article the monthly rebalance feature of the open-source backtesting library QSTrader was demonstrated on a simplistic equities/bonds ETF mix portfolio. In this article new streamlined code will be presented to allow straightforward modification of the portfolio weightings. In particular two new portfolios of ETFs will be presented, influenced by by a recent post[1] at The Capital
  • Spot Price Patterns with the COT Report [Milton FMR]

    This post goes into an in depth analysis of the commitment of traders report and its usefulness for predicting price movements. The CFTC collects data on the daily positions of large participants in the commodity markets. The data is aggregated in the weekly COT report which is published every Friday at 3;30 PM EST. So the one million dollar question is whether we can use this weekly report to

Quantocracy’s Daily Wrap for 10/24/2016

This is a summary of links featured on Quantocracy on Monday, 10/24/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Published Results Impact Future Results [Larry Swedroe]

    Financial research has uncovered many relationships between investment factors and stock returns. For investors, an important question is whether the publication of this research can impact the future size of factor premiums. Asking this question is crucial on two fronts. First, if anomalies are the result of behavioral errors, or even investor preferences, and the publication of research into
  • Connecting FXCM over FIX (QuickFix engine) [Quant Insti]

    We talked about the defacto standard for message communication in our previous article on FIX protocol. The Financial Information Exchange (FIX) Protocol is a message standard developed to facilitate the electronic exchange of information related to securities transactions. It is intended for use between trading partners wishing to automate communications.[1] In this article, we are going to