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Quantocracy’s Daily Wrap for 04/12/2023

This is a summary of links featured on Quantocracy on Wednesday, 04/12/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Portfolio Tilts versus Overlays: It’s Long/Short Portfolios All the Way Down [Flirting with Models]

    Several years ago, I started using the phrase, Its long/short portfolios all the way down. I think its clever. Spoiler: it has not caught on. The point I was trying to make is that the distance between any two portfolios can be measured as a long/short strategy. This simple point, in my opinion, is a very powerful and flexible mental model for understanding portfolios. If that sounds
  • Trend-Following Filters Part 6 [Alpha Architect]

    This article analyzes six trend-following indicators from a digital signal processing (DSP) frequency domain perspective in which the indicators are considered as digital filters and their frequency response characteristics are determined. In addition, potential trading signals generated by each indicator in the time domain are displayed graphically by applying the indicator to the monthly S&P
  • BERT Model Bidirectional Encoder Representations from Transformers [Quantpedia]

    At the end of 2018, researchers at Google AI Language made a significant breakthrough in the Deep Learning community. The new technique for Natural Language Processing (NLP) called BERT (Bidirectional Encoder Representations from Transformers) was open-sourced. An incredible performance of the BERT algorithm is very impressive. BERT is probably going to be around for a long time. Therefore, it is

Quantocracy’s Daily Wrap for 04/10/2023

This is a summary of links featured on Quantocracy on Monday, 04/10/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Terms of trade as FX trading signal [SR SV]

    All other things equal, an improvement in a countrys terms of trade, the ratio of export to import prices, translates into increased demand for its currency and a boost for its growth outlook. However, terms of trade are a rather subtle and sporadic influence. Therefore, many market participants are rationally inattentive to smaller changes and unwilling to trade on large changes in times of
  • Informational Efficiency of Stock Prices and Index Investing [Alpha Architect]

    The authors ask the following questions: Does the rise of index investing change information production in the economy? Does it affect the informational efficiency of stock prices? What are the Academic Insights? The authors augment (and improve) the Grossman and Stiglitz (1980) model of endogenous information acquisition by including a choice by investors where investors choose to be passive,
  • The Alpha Games: Technology Funds [Finominal]

    US tech funds underperformed their benchmark indices by 4% between 2018 and 2022 The factor contributions were marginal This resulted in a median alpha of -4% over the 5-year period INTRODUCTION Every day, fortunes are won and lost on the stock market. However, investing in stocks is not a zero-sum game as wealth is created from the profits earned and distributed by public companies. In contrast,

Quantocracy’s Daily Wrap for 04/08/2023

This is a summary of links featured on Quantocracy on Saturday, 04/08/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Mean reversion in government bonds [OS Quant]

    Interest rates are not necessarily a pure random walk. This assumption falls out from noticing that yields of different bond maturities must be in some way related. Have a look at the yields of the 30 year and 3 year U.S. Treasuries in the plot below. Notice that the 3 year yield bounces up and down mostly below the 30 year yield. DGS3 DGS30 0%2%4%6%8%10%12%14%16%18% Interest
  • Undersampling [Financial Hacker]

    All the popular smoothing indicators, like SMA or lowpass filters, exchange more lag for more smoothing. In TASC 4/2023, John Ehlers suggested the undersampling of price curves for achieving a better compromise between smoothness and lag. We will check that by applying a Hann filter to the original price curve and to a 5-fold undersampled curve. The C code of the used Hann filter, straight

Quantocracy’s Daily Wrap for 04/07/2023

This is a summary of links featured on Quantocracy on Friday, 04/07/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Combining Reversals with Time-Series Momentum Strategies [Alpha Architect]

    The empirical evidence from studies such as the 2017 paper A Century of Evidence on Trend-Following Investing and the 2020 paper Time Series Momentum in the US Stock Market: Empirical Evidence and Theoretical Analysis has found that time-series momentum (TSMOM) has demonstrated above-average excess returns in stocks, bonds, commodities, and currencies. Also called trend momentum or
  • Wes Discusses Value Investing Foundations with Isaiah Douglass [Alpha Architect]

    Here is a link to our recent chat with Isaiah Douglass and Josh Bennett. An overview of the conversation is below: On this weeks episode, Isaiah is joined by expert Dr. Wesley Gray, CEO of Alpha Architect, to discuss the concepts of value

Quantocracy’s Daily Wrap for 04/05/2023

This is a summary of links featured on Quantocracy on Wednesday, 04/05/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The FTX collapse: how did it impact traditional assets? [Alpha Architect]

    This article deals with the degree of market vulnerability to spillovers from disruptions in the cryptocurrency markets. This study investigates the impact of the FTX collapse and bankruptcy across global financial markets. What do responses of financial markets to the collapse of FTX say about investor interest in cryptocurrencies? Event-study evidence Imran Yousaf, Yasir Riaz, John W Goodell
  • EURUSD impact in 2022 [Quant Dare]

    The EURUSD currency pair has been one of the most closely watched and traded pairs in the forex market for years. Its movements can have a significant impact on the global economy and particular investments. In 2022, we witnessed a significant moment in the history of the global currency market. In September 2022, the USD posted gains against most major currencies. It rose more than 12%, reaching

Quantocracy’s Daily Wrap for 04/04/2023

This is a summary of links featured on Quantocracy on Tuesday, 04/04/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Factor Olympics 2023 Q1 [Finominal]

    After a great 2022 for factor investing, this year has started negatively for all traditional factors Perhaps this can be attributed to a revival of the growth theme as growth ETFs have outperformed again Size performed best, low volatility worst INTRODUCTION We present the performance of five well-known factors on an annual basis for the last 10 years. Specifically, we only present factors where

Quantocracy’s Daily Wrap for 04/02/2023

This is a summary of links featured on Quantocracy on Sunday, 04/02/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Improving Hedged Equity With a Short-Dated Ladder [Simplify]

    A costless collar, sometimes referred to as a hedged equity or defined outcome strategy, is a risk management strategy that combines holding a long position in a stock or index with buying a put spread defined by a specific set of strikes (e.g. 5% OTM long put, 20% OTM short put). This provides downside protection for the long stock position if the stock falls within the put spreads option
  • Is a Naive 1/N Diversification Strategy Efficient? [Alpha Architect]

    Investment strategy should be based on three fundamental principles. First, markets are highly, though not perfectly, efficient. That leads to the conclusion that active management is the losers game. Second, if markets are efficient, it must follow that you should believe that all unique sources of risk have similar risk-adjusted returns. Third, if all individual sources of risk have similar

Quantocracy’s Daily Wrap for 03/31/2023

This is a summary of links featured on Quantocracy on Friday, 03/31/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Can We Backtest Asset Allocation Trading Strategy in ChatGPT? [Quantpedia]

    Its always fun to push the boundaries of technology and see what it can do. The AI chatbots are the hot topic of actual discussion in the quant blogosphere. So we have decided to test OpenAIs ChatGPT abilities. Will we persuade it to become a data analyst for us? While we may not be there yet, its clear that AI language models like ChatGPT can soon revolutionize how we approach to finance

Quantocracy’s Daily Wrap for 03/30/2023

This is a summary of links featured on Quantocracy on Thursday, 03/30/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Investing & Unintended Consequences [Finominal]

    Simple equity ETFs often have exposures to other asset classes Gold stocks are bond proxies & growth stocks are short commodities Investors may have unintended bets in their portfolios INTRODUCTION ETFs used to be like surgical instruments. StateStreets SPY tracks the stocks of the S&P 500, iShares AGG the universe of US investment-grade bonds, and so on. Investors knew exactly what

Quantocracy’s Daily Wrap for 03/23/2023

This is a summary of links featured on Quantocracy on Thursday, 03/23/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Webinar recordings and notebook [Robot Wealth]

    Towards the end of last year, we ran a couple of free Zoom webinars on: The Basics of Edge Extraction the trader smarts of getting an edge Data Analysis for Traders an interactive research session. Here are the recordings: Basics of Edge Extraction Data analysis for Traders The colab research notebook for the second session can be found here. (To make sense of it youll want to
  • Volume and Mean Reversion Part 2 [Alvarez Quant Trading]

    From the Volume and Mean Reversion post, a reader sent a suggestion to instead use the ratio of 10 day moving average of the Close times Volume divided by the 63-day moving average of the Close times Volume (CV10/63). I had not tried this before and wanted to see how well it would work. First Steps I decided to follow the same path as the previous post. First testing on a very simple mean
  • Myth-Busting: The Economy Drives the Stock Market [Finominal]

    US real GDP growth and US stock market returns were positively correlated since 1900 However, the correlation was not consistent and even turned negative The evidence of this relationship from other countries is mixed INTRODUCTION Switch on Bloomberg TV or CNBC at any time of the day, and there is a good possibility the host will be explaining the daily ups and downs of the stock market as a
  • Generative Adversarial Networks: A rivalry that strengthens [Quant Dare]

    How does ChatGPT work? What is behind deep fake images of celebrities? How do we deal with the lack of data in finance? All these issues have in common the same underlying concept; they are based on generative models. Generative models are algorithms that create new instances of data that mimic the data on which they have been trained. Depending on their task, different generative models are