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Quantocracy’s Daily Wrap for 06/10/2016

This is a summary of links featured on Quantocracy on Friday, 06/10/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New Book Added: Fundamentals of Machine Learning for Predictive Data Analytics [Amazon]

    Machine learning is often used to build predictive models by extracting patterns from large datasets. These models are used in predictive data analytics applications including price prediction, risk assessment, predicting customer behavior, and document classification. This introductory textbook offers a detailed and focused treatment of the most important machine learning approaches used in
  • Mini-Meucci : Applying The Checklist – Steps 3-5 [Return and Risk]

    "In the future, instead of striving to be right at a high cost, it will be more appropriate to be flexible and plural at a lower cost. If you cannot accurately predict the future then you must flexibly be prepared to deal with various possible futures." Edward de Bono, author and thinker extraordinaire (born 1933) In this third leg of The Checklist tour, we will take 3 more steps,
  • State of Trend Following in May [Au Tra Sy]

    A strong down month in May for the state of trend following index, which solidifies the downtrend from the last two months and takes the YTD performance in the red, after the strong start to the year. Please check below for more details. Detailed Results The figures for the month are: May return: -6.17% YTD return: -4.52% Below is the chart displaying individual system results throughout May:

Quantocracy’s Daily Wrap for 06/09/2016

This is a summary of links featured on Quantocracy on Thursday, 06/09/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Markov Switching Regimes say bear or bullish? [Quant Dare]

    We continue with our last OBSSESION trying to capture an index trend but at the moment, not playing with future information. Markov Switching RegimesWe are going to introduce the Markov Switching Regimes (MSR) model which, as its name indicates, tries to capture when a regimen has changed to another one. This would be a change between opposite trends or it could consist in passing from being
  • Simple Machine Learning Model to Trade SPY (h/t AlgoTrading Reddit) [Alpha Plot]

    I have created a quantitative trading strategy that incorporates a simple machine learning model to trade the SPY as part of my ongoing research in quantitative trading. The focus here was not on creating a strategy with alpha but rather to develop a framework both in my mind and in code to develop more advanced models in the future. 1. Does SPY Exhibit Short-Term Mean Reversion or Momentum?
  • Trend Following carries on with downtrend in May [Wisdom Trading]

    May 2016 Trend Following: DOWN -7.37% / YTD: -1.71% This time, the negative performance for the index last month takes the Year-To-Date performance in the red, for the first time in 2016. Below is the full State of Trend Following report as of last month. Performance is hypothetical. Chart for May: Wisdom State of Trend Following – May 2016 And the 12-month chart: Wisdom State of Trend Following
  • Your best strategy in 2016 so far [Quant Investing]

    I am sure you also don't run after the most recent best performing investment strategy. I stopped doing this, a long time ago, after I (quite a few times) discovered I was the last to jump on the strategy just as it stopped working. But I suspect you also find it interesting to see what has worked well so far this year. That is why I decided to take a look at what investment strategy would

Quantocracy’s Daily Wrap for 06/08/2016

This is a summary of links featured on Quantocracy on Wednesday, 06/08/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Capital correction (pysystemtrade) [Investment Idiocy]

    This post is about how should you adjust the trading capital you have at risk given the profitability (or not) of your trading account. I'm posting this for three reasons. Firstly it's a pretty important topic. I address, in some detail, how to set your risk target for a given amount of trading capital in chapter 9 of my book. I only briefly discuss what you should do thereafter, once
  • Random Asset Allocation in the ASX200 [Ryan Kennedy]

    To paraphrase the old adage; "a monkey throwing darts will outperform most fund managers". I have seen this concept explored several times in relation to the SP500, but I was interested to see if it had any relevance to the ASX200. Our monkey with darts will be a random number generator, selecting 10 stocks to buy from the XJO in equal weight. We test with $100,000 of capital. Benchmark
  • Trend Model via Difference Between Long and Short-Term Variance [Quantpedia]

    We relate the performance of trend following strategy to the difference between a long-term and a short-term variance. We show that this result is rather general, and holds for various definitions of the trend. We use this result to explain the positive convexity property of CTA performance and show that it is a much stronger effect than initially thought. This result also enable us to highlight

Quantocracy’s Daily Wrap for 06/07/2016

This is a summary of links featured on Quantocracy on Tuesday, 06/07/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Will Bonds Deliver Crisis Alpha in the Next Crisis? [Alpha Architect]

    Bonds are often viewed as being great diversifiers due to the perception that they perform well during tough times for stocks. Historically this has been a true statement. But will it continue? Our answer: unclear. Most investors use correlation to measure the diversification benefit an investment might provide an existing portfolio. However, this article uses a slightly different approach to

Quantocracy’s Daily Wrap for 06/06/2016

This is a summary of links featured on Quantocracy on Monday, 06/06/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New Book Added: Data Science from Scratch with Python [Amazon]

    Data science libraries, frameworks, modules, and toolkits are great for doing data science, but theyre also a good way to dive into the discipline without actually understanding data science. In this book, youll learn how many of the most fundamental data science tools and algorithms work by implementing them from scratch. If you have an aptitude for mathematics and some programming skills,
  • Need for Speed: High Frequency Economic News Trading [Justinas Brazys]

    Markets are efficient if new information is incorporate instantly and essentially without any trading, i.e. price jumps to the correct level that represents all available information at the time. If you believe markets are indeed perfectly efficient, there seems to be no point in using news as a source of alpha in trading. However it is unlikely that information can be incorporated instantaneously
  • Tactical Trend-Following: Core or Alternative? [Flirting with Models]

    Answering whether a strategy should be a core holding or an alternative holding often has less to do with the investment strategy itself and more to do with an investors understanding of how that strategy will perform. Asset classes and strategies that investors are comfortable with, and have a strong understanding of why and when they will perform a certain way, are strong contenders for core
  • Summer, Winter and the Volatility Premium [Factor Wave]

    A member of our slack channel recently asked if there was an equivalent of "sell in May" for volatility trading. Does the volatility premium, the difference between implied volatility and the subsequent realized volatility, differ during summer and winter months? To test this idea for the S&P 500, I calculated the difference between the VIX and the realized volatility over the next

Quantocracy’s Daily Wrap for 06/05/2016

This is a summary of links featured on Quantocracy on Sunday, 06/05/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Mini-Meucci : Applying The Checklist – Step 2 [Return and Risk]

    "Guessing before proving! Need I remind you that it is so that all important discoveries have been made? Henri Poincar, French mathematician (1854-1912) In this second leg of The Checklist tour, Estimation, we are going to make some educated guesses about the true unknown distribution of the invariants. But first… Recap and a bit more on Quest for Invariance The quest for invariance is
  • Computation of the Loss Distribution not only for Operational Risk Managers [Quant at Risk]

    In the Operational Risk Management, given a number/type of risks or/and business line combinations, the quest is all about providing the risk management board with an estimation of the losses the bank (or any other financial institution, hedge-fund, etc.) can suffer from. If you think for a second, the spectrum of things that might go wrong is wide, e.g. the failure of a computer system, an

Quantocracy’s Daily Wrap for 06/03/2016

This is a summary of links featured on Quantocracy on Friday, 06/03/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New Book Added: Python Machine Learning [Amazon]

    Leverage Pythons most powerful open-source libraries for deep learning, data wrangling, and data visualization Learn effective strategies and best practices to improve and optimize machine learning systems and algorithms Ask and answer tough questions of your data with robust statistical models, built for a range of datasets Who This Book Is For If you want to find out how to use Python
  • Relative Strength Index (RSI) Model [Oxford Capital]

    I. Trading Strategy Developer: Larry Connors (The 2-Period RSI Trading Strategy), Welles Wilder (The RSI Momentum Oscillator). Source: (i) Connors, L., Alvarez, C. (2009). Short Term Trading Strategies That Work. Jersey City, NJ: Trading Markets; (ii) Wilder, J. W. (1978). New Concepts in Technical Trading Systems. Greensboro: Trend Research. Concept: The long equity trading system based on the
  • Factor Attribution of Jim Cramer’s Mad Money Charitable Trust [Quantpedia]

    This study analyzes the complete historical performance of Jim Cramers Action Alerts PLUS portfolio from 2001 to 2016 which includes many of the stock recommendations made on Cramers TV show Mad Money. Both since inception of the portfolio and since the start of Mad Money in 2005 (when it was converted into a charitable trust), Cramers portfolio has underperformed the S&P
  • Do European stocks follow the US on a daily basis? [UK Stock Market Almanac]

    Do European stocks follow the lead of the US market from the previous day? In other words if, say, the US market is down one day are European stocks more likely to fall in their trading session the following day? To test this the following chart plots the daily returns of the S&P 500 Index against the corresponding daily return of the EuroSTOXX 50 Index for the following day. Europe v US
  • Bubble Investing: Learning from History [Alpha Architect]

    We just wrote a piece for Forbes on financial bubbles in the lab. Punchline: investors initially underreact to fundamentals, then they overreact, and eventually prices correct. But how common are crashes? Ben has some interesting thoughts, but the results are limited to the US market. Now, one of my favorite academic authors Prof. Bill Goetzmann has a new paper that speaks to understand
  • Webinar: Feature Selection with Machine Learning [Quant Insti]

    Feature Selection is the automatic selection of attributes in your data (such as columns in tabular data) that are most relevant to the predictive modeling problem you are working on. Feature selection methods aid you in your mission to create an accurate predictive model. They help you by choosing features that will give you as good or better accuracy whilst requiring less data. The methods can
  • The Internal Bar Strength Indicator [Jonathan Kinlay]

    Internal Bar Strength (IBS) is an idea that has been around for some time. IBS is based on the position of the days close in relation to the days range: it takes a value of 0 if the closing price is the lowest price of the day, and 1 if the closing price is the highest price of the day. More formally: IBS = (Close Low) / (High Low) The IBS effect may be related to intraday

Quantocracy’s Daily Wrap for 06/02/2016

This is a summary of links featured on Quantocracy on Thursday, 06/02/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Cointegrated Time Series Analysis for Mean Reversion Trading with R [Quant Start]

    A while back we considered a trading model based on the application of the ARIMA and GARCH time series models to daily S&P500 data. We mentioned in that article as well as other previous time series analysis articles that we would eventually be considering mean reverting trading strategies and how to construct them. In this article I want to discuss a topic called cointegration, which is a
  • A Factor Investor s Perspective of the Economic Cycle [Factor Investor]

    Debates abound on the relative importance of the economic cycle to investment success. Peter Lynch famously said, "If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes. On the flip side, macro investment houses have constructed intricate frameworks to understand the economic machine. The challenge with economic data is that it is

Quantocracy’s Daily Wrap for 05/31/2016

This is a summary of links featured on Quantocracy on Tuesday, 05/31/2016. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Diversification Will Always Disappoint [Flirting with Models]

    Summary For its ability to reduce risk without necessarily sacrificing potential reward, diversification is known as the only free lunch on Wall Street. Diversification provides investors with the important ability to invest in the face of uncertainty. When viewed for its pieces instead of as a whole, a well-diversified portfolio will likely always contain an element that disappoints. This has
  • mini-Meucci : Applying The Checklist – Step 1 [Return and Risk]

    Introduction In this mini-Meucci series of posts we'll put the 10 steps of The Checklist into practice by constructing a low volatility portfolio in Python. This toy/basic example will be a short tourist trip, highlighting key attractions that you can then explore further… Of course, these posts should be read in conjunction with the latest slides (I'll be referring to the slides
  • A Few Little Links [Factor Wave]

    I'm currently working on three things: a VIX option trading strategy, a piece about how factors relate to earnings announcements and a Kelly criterion type thing for options. But none is particularly close to being done. So I thought i would post a few links to articles that I found interesting. I'm not (just) doing this to put up a blog post. I think both of these are good reads. First,