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Quantocracy’s Daily Wrap for 03/08/2023

This is a summary of links featured on Quantocracy on Wednesday, 03/08/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Candlestick Subplots with Plotly and the AlphaVantage API [Quant Start]

    AlphaVantage were founded in 2017 following the demise of the Yahoo Finance API. They offer OHLC data on 100,000+ securities, ETFs and mutual funds. Along with Forex, Crypto and Fundamental data, all accessible via their REST API. They offer free or premium membership which depend on the number API calls you require. Their premium packages range from 49.99 to $249.99 a month. While most of their
  • Risk contribution in portfolio management [Quant Dare]

    We usually compute return attribution to know how much each asset contributes to portfolio return. This calculation is quite easy because return formula is linear and sub-additive. In that context, one can split the whole portfolio return in smaller parts corresponding to each asset. However, although risk measures have to be coherent (monotonous, sub-additive, homogeneous and translational

Quantocracy’s Daily Wrap for 03/07/2023

This is a summary of links featured on Quantocracy on Tuesday, 03/07/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Turbulence Index: Regime-based Partitioning of Asset Returns [Portfolio Optimizer]

    The turbulence index, introduced in the previous blog post, is a measure of statistical unusualness of asset returns popularized by Kritzman and Li1. It provides a way to measure how much the behavior of a group of assets differs from its historical pattern. In this post, based on the paper Optimal Portfolios in Good Times and Bad by Chow et al.2, I will describe how the turbulence index can be
  • Active versus index funds: Latest results [Mathematical Investor]

    Fifty years ago, Princeton economics professor Burton Malkiel published A Random Walk Down Wall Street. He boldly asserted that a blindfolded chimpanzee throwing darts could pick a stock portfolio that would do as well as one created by many expert practitioners in the field. At the time, Malkiel envisioned a strategy of owning a broad-based set of stocks, saying mimicking a major stock index such
  • Shorting Lousy Stocks = Lousy Returns? [Finominal]

    Shorting stocks with poor features was unattractive throughout most of the last decade Combining features would not have improved performance It only started working again in 2022 INTRODUCTION Playing the stock market should be easy. When the economy is booming, buy equities. When its deteriorating, short them. Stock selection shouldnt take much effort either we just need to apply the
  • Salience Theory: How does it impact Momentum Profit? [Alpha Architect]

    This research examines the potential of enhancing a standard momentum strategy using signals derived from Salience Theory (ST). The strategy presented here is to exclude stocks with extreme salience scores and then analyze the risk and return properties of the ST strategy. Salience theory and enhancing momentum profits Myounghwa Sim, Hee-Eun Kim Finance Research Letters A version of this paper can

Quantocracy’s Daily Wrap for 03/04/2023

This is a summary of links featured on Quantocracy on Saturday, 03/04/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Slava Ukraini! Latest from Quantocracy contributor in Ukraine: DVOL Futures [Only VIX]

    The biggest news this week is that Deribit is moving ahead with launching futures on their DVOL Bitcoin volatility index. Like with every new product launch, I am cautiously optimistic, but given that Deribit has ~ 90% market share in cryptocurrency options volume, I think that the product has a great chance of success! If you trade volatility on Deribit, in addition to straddles and strangles you
  • Applying Corrective AI to Daily Seasonal Forex Trading [EP Chan]

    We applied Corrective AI (Chan, 2022) to a trading model that takes advantage of the intraday seasonality of forex returns. Breedon and Ranaldo (2012) observed that foreign currencies depreciate vs. the US dollar during their local working hours and appreciate during the local working hours of the US dollar. We first backtested the results of Breedon and Ranaldo on recent EURUSD data from
  • Intangibles and the Value Factor [Alpha Architect]

    Traditional value strategies use common valuation metrics, such as book-to-market (B/M), price-to-earnings (P/E), price-to-sales (P/S) or price-to-cash flow (P/CF), to establish a ratio between a market value and a fundamental anchor to assess the cheapness of a stock. The largest historical drawdown for traditional value strategies over the period November 2016-October 2020 raised the question of

Quantocracy’s Daily Wrap for 03/03/2023

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

  • Hybrid Asset Allocation [Allocate Smartly]

    This is a test of the latest tactical asset allocation strategy from Dr. Wouter Keller and JW Keuning and their paper: Dual and Canary Momentum with Rising Yields/Inflation: Hybrid Asset Allocation (HAA). Backtested results from 1971 follow. Results are net of transaction costs see backtest assumptions. Learn about what we do and follow 70+ asset allocation strategies like this one in near

Quantocracy’s Daily Wrap for 03/01/2023

This is a summary of links featured on Quantocracy on Wednesday, 03/01/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • I got more than 99 instruments in my portfolio but butter ain’t one of them [Investment Idiocy]

    As those of you who follow me on the Elon Musk Daily News App will know, I received physical copies of my new book last week (exciting!). Global supply chains being what they are, you lot will have to wait until April to get your copies. Sorry. Anyway one of the themes I touch on in the book is the truely amazing diversification that trend following strategies offer when run across multiple
  • International diversification – does it work (when you need it)? [Alpha Architect]

    In this article, the authors examine the research on the benefits of international diversification. Some argue that because equity markets generally crash simultaneously, there are no benefits to having equity diversification. The evidence from this paper rejects this hypothesis. Diversification During Hard Times Najah Attig and Oumar Sy Financial Analyst Journal, 2023 A version of this paper can

Quantocracy’s Daily Wrap for 02/27/2023

This is a summary of links featured on Quantocracy on Monday, 02/27/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Performance attribution of a crypto market-neutral book on a statistical risk model [Gautier Marti]

    In this short blog post, we investigate whether a simple systematic market-neutral stat arb crypto book loads on the main components of a statistical risk model. from datetime import timedelta import pandas as pd from tqdm import tqdm import statsmodels.formula.api as smf def compute_pnl_attribution( symbol, date, weights, returns, factor_returns, info, fexp_cols, ): if symbol not in
  • ETF Crusades [Finominal]

    This research note is a guest post from Rodolfo Martell, PhD, Head of Portfolio Strategy, of Pluribus Labs LLC, a San Francisco-based systematic active equity manager that is part of Exos Financial. SUMMARY Religious-themed ETFs have increased their AUM to roughly $1 billion 3 / 4 products outperformed their benchmarks since 2020 The outperformance can be attributed to their factor exposures

Quantocracy’s Daily Wrap for 02/25/2023

This is a summary of links featured on Quantocracy on Saturday, 02/25/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Inside the Minds of Expected Stock Returns [Alpha Architect]

    Financial literature has produced a long list of firm characteristics (referred to as factors) that provide information as to future stock returns, with the explanation for the casual relationship between the characteristics and returns being either risk- or behavioral-based. The traditional finance (risk-based) explanation is that stocks with certain characteristics tend to perform worse when the
  • How to Deal With Missing Financial Data [Quantpedia]

    The problem of missing financial data is widespread yet often overlooked. An interesting insight into the structure of missing financial data provides a novel research paper by authors Bryzgalova et al. (2022). Firstly, examining the dataset of the 45 most popular characteristics in asset pricing, the authors found that missing data is frequent among almost any characteristic and affects all kinds
  • Predicting base metal futures returns with economic data [SR SV]

    Unlike other derivatives markets, for commodity futures, there is a direct relation between economic activity and demand for the underlying assets. Data on industrial production and inventory build-ups indicate whether recent past demand for industrial commodities has been excessive or repressed. This helps to spot temporary price exaggerations. Moreover, changes in manufacturing sentiment should

Quantocracy’s Daily Wrap for 02/23/2023

This is a summary of links featured on Quantocracy on Thursday, 02/23/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Slava Ukraini! Latest from Quantocracy contributor in Ukraine: DBCVIX Index [Only VIX]

    Deutsche Bank Currency Volatility Index was developed to provide an implied volatility benchmark for major currency markets. The index is designed to represent investors expectation of future volatility, and is calculated as the weighted arithmetic average of the 3-month level of implied volatility for 9 major currency pairs – with weights: EURUSD 35.90% USDJPY 21.79% GBPUSD 17.95 USDCHF 5.13%
  • What Is Managed Futures? [Flirting with Models]

    Much like in 2008, managed futures as an investment strategy had an impressive year in 2022. With most traditional asset classes struggling to navigate the inflationary macroeconomic environment, managed futures has been drawing interest as a potential diversifier. Managed futures is a hedge fund category that uses futures contracts as their primary investment vehicle. Managed futures managers can
  • Exploring the finnhub.io API [Robot Wealth]

    Over the last few years, a number of new market data providers have come online. They tend to have modern websites, broad coverage, and well-documented RESTful APIs. Their services are often priced very competitively especially for personal use and usually have generous free tiers. One such newcomer is finnhub.io . Its offering includes stock, bond, crpto, and FX historical price data and
  • The Hard-Knock Life of Short Sellers [Finominal]

    Short-biased hedge funds provided negative S&P 500 beta until 2011 Thereafter returns became less negatively correlated, but worsened The strategy has generated limited diversification benefits for investors INTRODUCTION Running a hedge fund is tough, but some types are tougher to manage than others. For example, an equity long-short fund benefits from a structurally rising stock market, which
  • On the origins of Bayesian statistics [Quant Dare]

    Bayesian statistics is a powerful field of mathematics that has wide-ranging applications in many fields, including finance, medical research, and information technology. It allows us to combine prior beliefs with evidence to obtain new posterior beliefs, thereby enabling us to make more informed decisions. In this post we will have a brief look at some of the main mathematicians that gave birth

Quantocracy’s Daily Wrap for 02/17/2023

This is a summary of links featured on Quantocracy on Friday, 02/17/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Introducing Hybrid Asset Allocation (HAA) [TrendXplorer]

    HAA aims to offer retail investors a tactical asset allocation strategy that is both balanced and aggressive at the same time. HAAs hybrid approach combines traditional dual momentum with canary momentum which results in robust crash protection with low cash-fractions. HAA effectively selects assets only when they are most likely to appreciate. HAAs ability to obtain positive returns
  • Major brokerages and news media feature technical analysis [Mathematical Investor]

    Suppose, in a national TV newscast, instead of citing data, analysis and predictions from major government agencies, the weatherperson displayed a chart of recent temperatures, noting trends, waves and breakout patterns. Most of us would not have confidence in such a dubious and unorthodox forecast. Or suppose, at a medical clinic, that a cardiologist made some hand measurements
  • A Dark Winter for Value Stocks [Alpha Architect]

    As seen in the table below, the four-year period November 2016-October 2020 could be described as a dark winter for value stocks. U.S. value stocks underperformed U.S. growth stocks by 16.81 percentage points per annum (20.35% vs. 3.54%), the largest historical drawdown for value stocks in the U.S.even greater than the during the dot-com bubble of the late 1990s. While the value
  • Research Review | 17 February 2023 | Risk Analysis [Capital Spectator]

    Submergence = Drawdown Plus Recovery Dane Rook (Stanford University), et al. February 2023 Drawdowns and recoveries are often analyzed separately yet doing so can leave investors with a distorted view of risk. Indeed, this problem is so commonplace that theres no consistently-used term for the joint event of a drawdown plus its subsequent recovery. We propose the term submergence for

Quantocracy’s Daily Wrap for 02/15/2023

This is a summary of links featured on Quantocracy on Wednesday, 02/15/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Investigating Price Reaction Around Bitcoin & Ethereum Events [Quantpedia]

    Cryptocurrencies are a high-risk and very speculative asset class that, from being used only by tech geeks worldwide, spread from small retail craziness of early adopters to institutional adoption and mainstream. Some claim it to be a world-changing concept with the utilization of blockchain (databases) and smart contracts that open a wide range of opportunities, from decentralizing finance to
  • Yield curve modeling [Quant Dare]

    The financial industry is constantly searching for models that can help accurately predict the behavior of interest rates. In this article we will explore one of the most widely used models for this purpose, the Nelson-Siegel (NS) model. What is the Nelson-Siegel Model? The NS model is a yield curve factor model. Yield curve factor models are based on the idea that the yield curve can be