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Quantocracy’s Daily Wrap for 06/30/2015

This is a summary of links featured on Quantocracy on Tuesday, 06/30/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 06/28/2015

This is a summary of links featured on Quantocracy on Sunday, 06/28/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Best Links of the Week [Quantocracy]

    The best five links of the week ending Saturday, 06/27, as voted by our readers: Interview with Ernest Chan [Better System Trader] Think MPT Doesnt Work? Clearing Up Some Misconceptions [CSS Analytics] Creating an Open Source Hedge Fund Strategy [Quants Portal] Losing Streak Indicator [System Trader Success] A Random Ass Kicking
  • Interview with Andreas Clenow [Better System Trader]

    Andreas Clenow is a hedge fund manager who specialises in developing and trading quantitative strategies across all asset classes. He is currently a principal at ACIES Asset Management, which he joined after having successfully established his own hedge fund. Prior to his role as a hedge fund trader he had a lightning career with Reuters, where he, as Global Head of Equity
  • Lazy Backtesting Update [John Orford]

    The S&P Dow Jones data source is now available to use in the Lazy Backtesting IDE. All manner of interesting investable strategies and asset classes, including volatility and retirement date targeting; Vix contango & backwardation and other quant-style strategies; which you can combine, repurpose and benchmark against. Other than that, there is an ever growing
  • Bad Breadth Milestone A Warning For Stocks? [Dana Lyons]

    Weve been discussing the weakening market breadth recently, especially as it pertains to New Highs vs. New Lows. Again, our contention is that the more stocks participating in a rally, the healthier the rally is. The most recent example of this weak breadth was Wednesdays post on the fact that Nasdaq New Highs-New Lows have not hit a 52-week high in over 400 days. Today brings another

Best Links of the Week

The best five links of the week ending Saturday, 06/27, as voted by our readers:

We’ve given readers control over the content here at Quantocracy with the ability to vote on links in our Mashup. Readers can reward and encourage quality workmanship by deciding which links get visibility. If you haven’t done so already, we invite you to be a part of that by taking a minute to register to vote. Once registered, you can choose to remain logged in indefinitely, making voting as easy on you the reader as possible. Let your voice be heard!

Read on Readers!
Mike @ Quantocracy

Quantocracy’s Daily Wrap for 06/26/2015

This is a summary of links featured on Quantocracy on Friday, 06/26/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Decision Moose Asset Allocation Framework [CXO Advisory]

    A reader suggested a review of the Decision Moose asset allocation framework of William Dirlam. Decision Moose is an automated framework for making intermediate-term investment decisions. Decision Moose focuses on asset class momentum, as augmented by monetary policy, exchange rate and interest rate indicators. Its signals tell followers when to switch from one index fund
  • The Market For Lemons : A Lesson For Dividend Investors [Research Affiliates]

    Central banks the world over are buying high-quality bonds, thereby removing them from the market and forcing savers to find alternative strategies to meet their income needs. In this environment of financial repression and near-zero interest rates, dividend-yield (or equity income) investing has become increasingly popular. Investors are understandably reallocating their portfolios fro
  • Estimating Crash-Risk Potential For The US Stock Market [Capital Spectator]

    History shows rather clearly that the stock market is prone to extreme events, aka crashes. The challenge is deciding when the risk for a repeat performance is unusually high. The literature offers endless possibilities, which is a reminder that the market can crumble for any number of reasons. The leading factor, of course, is the business cycle. But internal market issues cant be ign
  • Risk Aversion, Information Choice, and Price Impact [Alex Chinco]

    Kyle (1985) introduces an information-based asset-pricing model where informed traders keep trading until the marginal benefit of holding one additional share of the asset is exactly offset by the marginal cost of this last trades price impact. This model has really nice intuition, but it also has some undesirable features. For instance, traders in Kyle (1985) are risk neutral and don

Quantocracy’s Daily Wrap for 06/25/2015

This is a summary of links featured on Quantocracy on Thursday, 06/25/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Think MPT Doesn t Work? Clearing Up Some Misconceptions [CSS Analytics]

    I have spent many years toiling with creating different asset allocation methodologies including the application of traditional and non-traditional portfolio optimization. Given the recent flare of articles on this topic in the blogosphere, I felt it was worthwhile to share my two cents. Applying optimization to a tactical approach is a topic that readers may already be familiar with,
  • Backtesting A Cautionary Example [Scott’s Investments]

    My previous article detailed backtest results for the ETFReplay.com portfolio. Aggregate, risk-adjusted results since 2004 were impressive when compared to a 60/40 Vanguard mutual fund. However, results over the past 2-3 years lagged the benchmark. The test below was conducted using Portfolio123 (P123?). It uses a similar ranking system to the ETFReplay 6/3/3 system but
  • Lazy PCA Site Update [John Orford]

    There's been a bunch of feature suggestions since the last update to the Lazy PCA site. All the code is on Github, if you have a little Javascript experience, I will gladly walk you through it. Please keep shooting feature ideas over too though. You know when you're done with an app when you can't remove any more features, and that's where my minds
  • How to Get a List of all NASDAQ Securities as a CSV file using Python? [Quant at Risk]

    This post will be short but very informative. You can learn a few good Unix/Linux tricks on the way. The goal is well defined in the title. So, whats the quickest solution? We will make use of Python in the Unix-based environment. As you will see, for any text file, writing a single line of Unix commands is more than enough to deliver exactly what we need (a basic text file processing)

Quantocracy’s Daily Wrap for 06/24/2015

This is a summary of links featured on Quantocracy on Wednesday, 06/24/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Mutual Fund Sector Rotation Ideas from readers [Alvarez Quant Trading]

    he post ETF Sector Rotation generated good ideas on what to try differently. This post will research two ideas using Fidelity sector mutual funds. The previous post focused on two ideas on the Select Sector SPDR ETFs. Mutual Fund Universe These tests will use the Fidelity Sector Mutual Funds. The list was provided by a reader from the original post. The data is
  • How to Make Money in Markets: Understanding Expectation Errors [Alpha Architect]

    A new working paper from Gennaili, Ma, and the one-the-only Andrei Shleifer. Expectations and Investment Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs expectations of earnings growth. The information in expectations data is not sub
  • A Random Ass Kicking of Wall Street [Following the Trend]

    A random number generator can beat your mutual fund. Given a choice between a random portfolio and a mutual fund, Ill go with the randomizer every day of the week and twice on Sundays. You think Im joking? Im not joking. Trashing the mutual fund industry is almost like beating a dead horse. Except of course that its a thriving, multi billion dollar dead horse. Still, po
  • Stops IV: The Trailing Stop [Factor Wave]

    A reader asked if there was any real difference between using a fixed stop at a given distance from our entry price or a trailing stop which we move so it stays a certain distance from the highest amount the investment has made. A trailing stop is a very comforting strategy. It seems to protect us from the painful experience of seeing our winners turn into losers (covered in this post).
  • Will the quants blow up the markets again? [Humble Student of the Markets]

    Josh Brown had a fascinating post which postulated that the quants pose a significant systemic risk to market volatility: Theres an interesting idea going around that asset management specifically the metastasizing quantitative strategies run via black box are where the next big scare is due to come out of. Volatility has been so low, for so long, that winning trades
  • Modeling Interest Rates Meucci Style [Return and Risk]

    I have signed up for Attilio Meuccis ARPM Bootcamp next month (July 13-18) in NYC http://www.symmys.com/arpm-bootcamp, and need to do quite a bit of prep as its going to be a deep-dive The Advanced Risk and Portfolio Management Bootcamp provides in-depth understanding of buy-side modeling from the foundations to the most advanced statistical and optimization techniqu
  • A Conjecture Which Unifies Timing Strategies [John Orford]

    When arrested in Asia (many countries, not everywhere) never step into the station. Once you put a foot inside, there's an unstoppable force pulling you deeper into the bowels of the judicial system. Conviction rates in Japan, Korea and China are 99%+. For comparison, conviction rates are in the 70s in the UK and US. Why?
  • New related paper to #8 – FX Momentum [Quantpedia]

    Authors: Grobis, Heinonen Title: Is Momentum in Currency Markets Driven by Global Economic Risk? Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2619146 Abstract: This article documents a robust link between the returns of the momentum anomaly implemented in currency markets and global economic risk, measured by the currency r

Quantocracy’s Daily Wrap for 06/23/2015

This is a summary of links featured on Quantocracy on Tuesday, 06/23/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Creating an Open Source Hedge Fund Strategy [Quants Portal]

    The idea is to build a quantitative hedge fund strategy based on momentum investing. With the obvious interest that I see on Quantocracy, I felt that this would be a topic that many of us are interested in. I didnt want to run the risk of previous employers saying I used their IP, so I hired 4 students (Still currently studying, I listed the qualification they were busy wi
  • Fad Investments (the Case of Good Harbor) [EconomPic]

    Investment News outlines an arbitration request by an investor seeking damages for being placed in two funds; one to F-Squared (an outright fraud) and another to Good Harbor's U.S. Tactical Core Fund (GHUIX). The adviser placed approximately $900,000 of the investor's savings, which his lawyer said was the vast majority, in products managed by two so-called ETF strategi
  • How The Russell 2000 has Dominated the S&P 500 in Late June [Quantifiable Edges]

    Yesterday I published a study that showed the week after June opex has exhibited weakness in recent years. An astute newsletter subscriber suggested to me that this could be partially due to Russell rebalancing, which always happens at the end of June. His comments led me to wonder how the Russell 2000 might have performed versus the SPX during late June. The table below shows how the Russell 2000
  • New Backtests for ETFReplay Portfolio [Scott’s Investments]

    I am frequently asked about various strategy and portfolio performance metrics and backtests. A reader recently asked if there are any current backtests for the ETFReplay 6/3/3 Portfolio so I decided now is the appropriate time to provide updated results. The strategy background is available here and is updated monthly on Scott's Investments, including a real-time simulate
  • Beginner’s Guide to Time Series Analysis [Quant Start]

    Over the last few years we've looked at various tools to help us identify exploitable patterns in asset prices. In particular we have considered basic econometrics, statistical machine learning and Bayesian statistics. While these are all great modern tools for data analysis, the vast majority of asset modeling in the industry still makes use of statistical time series anal
  • An Investable ‘Investable Vix’ Strategy [John Orford]

    The ideas I sketch out every afternoon are fanciful sweet little things, decorated to perfection. Then someone ventures a bite and sometimes finds that that's all they are. Fanciful. Readers are fantastic guinea pigs! Ilya got in touch about this post about diversification and rightly mentioned that it is impossible to actually invest
  • Oh Those Summer Nights [Overnight Edges]

    Danny Zucco and Sandy loved the Summer Nights, but how have they played out for the market over the years? Below I examine two time periods. As youll see, the edge may be shifting. First, lets look at numbers from the summers of 2000 2012 (from the night of June 21st the night of September 20th). 2015-06-23 Q1 As you can see, summer was not a great tim
  • Trading Stocks using Bonds [Jay On The Markets]

    In case you are new to this game or just in case you never noticed, there are a lot of ways to play this game. This article details one. I cant honestly say that this is a good strategy the test period is relatively short, it uses leverage so it is risky, and drawdowns may be more than some people can bear. Still, there is an old saying that goes something like this:
  • The Probability of Something that has Never Occurred [Factor Wave]

    An astute reader of the post on Risk pointed out that one of the reasons risk management is hard is because it often involves estimating the chance of something that has never happened before. For example, what is the probability of the US defaulting on its debt or of Apple going bankrupt? Sometimes there are instruments in the market that imply these probabilities (

Quantocracy’s Daily Wrap for 06/21/2015

This is a summary of links featured on Quantocracy on Sunday, 06/21/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Interview with Ernest Chan [Better System Trader]

    Ernie Chan is an expert in the application of statistical models and software for trading currencies, futures, and stocks. He has built and traded numerous quantitative models for investment banks and hedge funds. He is now the Managing Member of QTS Capital Management, commodity pool operator and trading advisor, managing a hedge fund as well as individual accounts.
  • Fractal Investment Strategy [John Orford]

    Martin Stisen got in touch after reading about the Mean Reversion + Momentum Strategy last week with an idea. Using the Hurst exponent to predict future returns. Quirky ideas are exciting. The Hurst exponent was originally found by observing how the Nile River waxed and waned over the years and now for base money making purposes we will apply it to

Quantocracy’s Daily Wrap for 06/20/2015

This is a summary of links featured on Quantocracy on Saturday, 06/20/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Stops II [Factor Wave]

    In this post I surmised about the effect of stops and got about as far as I could by speculating from my armchair. So I simulated ten thousand investments. Before there is any stop we have a distribution with a mean of 10% and a standard deviation of 20%. This is similar to the performance of the S&P 500 since 1950, which has an annual return of 7.4% and a standard deviatio
  • Automated Daily Stock Database Updates Using The R Statics Project [Godel’s Market]

    I received a request from pcavatore several posts ago. pcavatore was interested in "database update automation via R script." He wanted to know "how to run a daily task to update prices in the database." In this article we'll be using R and the RMySQL package to access and update a MySQL database with stock information from Yahoo! Finance. If you do not have R installed,