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Quantocracy’s Daily Wrap for 11/02/2023

This is a summary of links featured on Quantocracy on Thursday, 11/02/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Big boost for quant_rv going long/short SPY/SH (Part 11) [Babbage9010]

    sum: quant_rv was already beating SPY in our last post, with a long-only approach. Testing the remaining (flat) days finds that theyre dominated by losers, so if we go short (using SH ETF) instead of flat, boom! performance jumps again recap quant_rv is a simple quant strategy written in R that goes long SPY when volatility is low, and flat when vol is high. The current quant_rv version

Quantocracy’s Daily Wrap for 11/01/2023

This is a summary of links featured on Quantocracy on Wednesday, 11/01/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Index Tracking: Reproducing the Performance of a Financial Market Index (and more) [Portfolio Optimizer]

    An index tracking portfolio1 is a portfolio designed to track as closely2 as possible a financial market index when its exact replication3 is either impractical or impossible due to various reasons4 (transaction costs, liquidity issues, licensing requirements). In this blog post, after reviewing the underlying mathematics described in Hallerbach5, I will review a couple of applications of index
  • Higher Volatility, Higher Alpha? [Finominal]

    Intuitively fund managers should create more alpha when volatility is higher However, neither mutual nor hedge fund managers have been able to do so Likely explained by fund managers being less rational than assumed INTRODUCTION However, a period of higher volatility is a good environment for alpha generation and provides opportunities. Robert Prince, CIO Bridgewater Associates,

Quantocracy’s Daily Wrap for 10/29/2023

This is a summary of links featured on Quantocracy on Sunday, 10/29/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Dissecting the Idiosyncratic Volatility Puzzle [Alpha Architect]

    Idiosyncratic volatility (IVOL) is the volatility of a security that cannot be explained by overall market volatilityit is the risk unique to a particular security. IVOL contrasts with systematic risk, which is the risk that affects all securities in a market (such as changes in interest rates or inflation) and, therefore cannot be diversified away. On the other hand, the risks of high IVOL

Quantocracy’s Daily Wrap for 10/25/2023

This is a summary of links featured on Quantocracy on Wednesday, 10/25/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Part 10 quant_rv: getting somewhere now, by adding normalized ATR [Babbage9010]

    TL;DR ~ This post explores adding a normalized Average True Range (nATR) measure that behaves in a similar fashion to other volatility measures, including a low volatile anomaly and nATR gives quant_rv a nice boost in backtesting performance. Not all goals for quant_rv are met yet, but were definitely seeing improvements. So, Im getting nearer to a solution for all the quant_rv goals.
  • Demystifying Equity Market Neutral Investing [Simplify]

    The 60/40 portfolio, the bread-and-butter portfolio of todays wealth management industry, is limited to just two core drivers of returns: equities and bonds. Is there someplace else we can turn to for a compelling yet distinct source of returns? Yes, there are several places to look in fact, one of the most interesting being Equity Market Neutral (EMN) investing. EMN strategies can not only

Quantocracy’s Daily Wrap for 10/23/2023

This is a summary of links featured on Quantocracy on Monday, 10/23/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Unmasking Insights through Human-AI Differences in Earnings Conference Q&A [Alpha Architect]

    This paper acknowledges the pivotal role of earnings calls in disseminating value-relevant information, with particular emphasis on the Q&A segment. However, it confronts the inherent challenge posed by the unstructured nature of language in these calls, complicating quantitative analysis. In response, the authors innovate by introducing a novel measure designed to grasp the subtleties of
  • Determining the Optimal Benchmark for Funds [Finominal]

    SUMMARY Identifying the right benchmark for a fund or portfolio can be difficult Many common metrics like correlation or betas do poorly for benchmark selection Combining metrics is more effective INTRODUCTION Is gold the right benchmark for gold miners? Although these companies focus on excavating the precious metal, there are plenty of operational issues like staff strikes, collapsing mines, or

Quantocracy’s Daily Wrap for 10/22/2023

This is a summary of links featured on Quantocracy on Sunday, 10/22/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Market Cap vs Dollar Volume: Which to Use for Universe Selection? [Quant Rocket]

    Market cap and dollar volume are two commonly used metrics for filtering a trading universe by size of security. Does it matter which one you use? In this post, I quantify the difference between market cap and dollar volume and explain the kinds of stocks that may unexpectedly appear in your universe with each metric. Overview of market cap and dollar volume Market cap and dollar volume are both
  • Macro demand-based rates strategies [SR SV]

    The pace of aggregate demand in the macroeconomy exerts pressure on interest rates. In credible inflation targeting regimes, excess demand should be negatively related to duration returns and positively to curve-flattening returns. Indeed, point-in-time market information states of various macro demand-related indicators all have helped predict returns of directional and curve positions in
  • How an old Nintendo baddie boosts portfolio analysis [PyQuant News]

    Todays newsletter is based on a readers suggestion. We look at k-medoids which is a villain in the popular Nintendo game Metroid. No its not. But if you know Metroid, you have to agree: It sounds like one! Its actually a powerful method used in data science to cluster similar data together. Its robust to outliers so super useful when clustering features of a portfolio of financial

Quantocracy’s Daily Wrap for 10/20/2023

This is a summary of links featured on Quantocracy on Friday, 10/20/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 10/18/2023

This is a summary of links featured on Quantocracy on Wednesday, 10/18/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Hello ChatGPT, Can You Backtest Strategy for Me? [Quantpedia]

    You may remember our blog post from the end of March, where we tested the current state-of-the-art LLM chatbot: Time flies fast. More than six months have passed since our last article, and half a year in a fast-developing field like Artificial intelligence feels like ten times more. So, we are here to revisit our article and try some new hacks! Has the OpenAI chatbot made any significant

Quantocracy’s Daily Wrap for 10/16/2023

This is a summary of links featured on Quantocracy on Monday, 10/16/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Vector AutoRegression models: Implementation in Python and R [Quant Insti]

    Whenever you want to estimate a model for multiple time series, the Vector Autoregression (VAR) model will serve you well. This model is suitable for handling multiple time series in a single model. You will learn here the theory, the intricacies, the issues and the implementation in Python and R. What is a VAR model? Creating a VAR model A stationary VAR VAR Lag Selection Criteria Estimation of a
  • Momentum Research: a summary: high quality articles of note [Alpha Architect]

    The Jegadeesh and Titman (1993) paper on momentum established that an equity trading strategy consisting of buying past winners and selling past losers, reliably produced risk-adjusted excess returns. The Jegadeesh results have been replicated in international markets and across asset classes. As this evidence challenged and contradicted widely accepted notions of weak-form market efficiency, the

Quantocracy’s Daily Wrap for 10/15/2023

This is a summary of links featured on Quantocracy on Sunday, 10/15/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Use OpenAI prompts for stock news sentiment [PyQuant News]

    In todays newsletter, youll use the OpenBB SDK to download news for a topic. Then, youll use OpenAI and build a prompt to predict the sentiment of a news headline. Youll bring it all together with LangChain. The result is a pandas DataFrame with a column of news headlines and a column with the predicted sentiment. Lets go! Use OpenAI prompts for stock news sentiment Generative
  • Aliens made this rock: The post-hoc probability fallacy in biology, finance and cosmology [Mathematical Investor]

    While out hiking, I found this rock. Evidently it was created by aliens, as can be shown by a probability argument. The following table gives measurements made on the rock. The first two rows give the overall length and width of the rock. Each of the next six rows, after the first two, gives thickness measurements, made on a 3cm x 6cm grid of points from the top surface. All measurements are in