This is a summary of links featured on Quantocracy on Monday, 11/23/2015. To see our most recent links, visit the Quant Mashup. Read on readers!
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Valuations Do Matter (Even Over Shorter Time Frames) / Momentum Driven Valuation Timing [EconomPic]I often read that valuations don't matter over the short-term (a case often cited against market timing). Over very short periods (hours, days, etc…) this certainly may be true, but while there can be a lot of variability around month-to-month or year-to-year performance, I completely disagree with the sentiment that it doesn't matter. That said, there are better ways than just using
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Frog in the Pan: Identifying the Highest Quality Momentum Stocks [Alpha Architect]We test a frog-in-the-pan (FIP) hypothesis that predicts investors are inattentive to information arriving continuously in small amounts. Intuitively, we hypothesize that a series of frequent gradual changes attracts less attention than infrequent dramatic changes. Consistent with the FIP hypothesis, we find that continuous information induces strong persistent return continuation that does not
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Better Tests with Oversampling [Financial Hacker]The more data you use for testing or training your strategy, the less bias will affect the test result and the more accurate will be the training. The problem: price data is always in short supply. Even shorter when you must put aside some part for out-of-sample tests. Extending the test or training period far into the past is not always a solution. The markets of the 1990s or 1980s were very
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Great online courses for learning R [R for Traders]The last few months have seen a flurry of activity in terms of new courses being created for the R programming language. Udemyis one such online venue that provides a surprisingly broad array of topics related to the R language. These topics include statistical analysis, regression, data science, machine learning, quantitative trading, data visualization and more. As an adjunct instructor in the
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Due Diligence: Ask This, Not That [Flirting with Models]Summary Due diligence is an important practice in our industry and one that should be ever-evolving. There are some questions we receive on due diligence questionnaires that are well intentioned, but we think can be improved. Finally, in doing due diligence, we think that after the question how, there should almost always be a follow-up question of why? We answer a lot of due
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Avoiding Stock Market Crashes with the Hi-Lo Index of the S&P500 [System Trader Success]This daily indicator is calculated as the ratio of the number of S&P500 stocks that have reached new 3-month-highs minus those that have reached new 3-month-lows, divided 500. Exiting and entering the stock market according the indicators signals would have avoided major drawdowns of the market during the backtest period from Jan-2000 to Aug-2015. Switching according to the signals between
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Is the Stock Market Different? [Quintuitive]Overall, we expect the stock market to go higher. There is a good reason for that the stock market is positive close to 54% of the days. A natural questions is whether this holds for other markets as well. There is inflation after all. Looks like the stock market is more or less unique in that regard. A little bit of R magic over the last 10 years of back-adjusted data from CSIData, and we
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Another Look At Thanksgiving Week [Quantifiable Edges]Historically Thanksgiving week has shown some very strong tendencies. The table below is one I have shown a few times over the years. I decided to update it again this year. 2015-11-23 image1 Monday and Tuesday dont show anything suggesting an edge. Mondays total return was actually negative until 2008 when it posted a gain of over 6%. Wednesday and Friday, on the other hand, appear to be