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Quantocracy’s Daily Wrap for 10/24/2022

This is a summary of links featured on Quantocracy on Monday, 10/24/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Mean Reversion Check Up 2022 [Alvarez Quant Trading]

    A common question I get is whether mean reversion is still working. My response is I am still trading a mean reversion strategy but the edges seem to get smaller. Over the year I have investigated this. I was asked again recently and wanted to investigate again. Here are the results of my 2022 investigation. The Rules Test date range 1/1/2000 to 9/30/2022. I wanted to keep the rules simple. I
  • Live Algo Trading on the Cloud – Vultr [Algo Trading 101]

    What does live algorithmic trading on the Cloud mean? Rerequisite Basic Guide What are the pros of deploying your trading strategies to the Cloud? What are the cons of deploying your trading strategies to the Cloud? What is the Cloud Service? What is the Cloud used for? What cloud providers are good? What is Vultr? Why should I use Vultr? Why shouldnt I use Vultr? What does Vultr offer? How
  • Fast Logging for HFT In Rust [Mark Best]

    In this article well be discussing a fast way of logging in Rust and its application to high frequency trading. The code presented here solves two problems, one is well known, the latter less so. It is a imperative to avoid using IO operations within the strategy thread, but logging operations can hide a lot of memory operations that should also be avoided. Logging from the strategy is useful
  • Are hedge funds losing their hedge? [Mathematical Investor]

    Hedge funds were pioneered some 70 years ago by Australian financier Alfred Winslow Jones. His idea was to combine a long position (i.e., one that profits if the securities go up in price), typically a set of growth stocks, with a short position (i.e., one that profits if the securities go down in price) on the other part of the portfolio. Jones argued that this long-short
  • Thematic versus Momentum Investing [Finominal]

    Thematic products underperform the stock market on average The exposure to the momentum factor was low to negative recently Systematic performance chasing beats performance chasing with a narrative INTRODUCTION Space: the final frontier. Where no man has gone before. Well, wealthy folks can now go there by booking a ticket with Virgin Galactic. It will not be deep space and it could be debated
  • The Effect of Indexing on Price Discovery and Limits to Arbitrage [Alpha Architect]

    The rise of stock indexing has raised concerns that index investing distorts stock pricesindexers are free riders who rely on prices without contributing to price discovery, thus reducing price efficiency. Byung Ahn and Panos Patatoukas, authors of the study Identifying the Effect of Stock Indexing: Impetus or Impediment to Arbitrage and Price Discovery? published in the August 2022 issue

Quantocracy’s Daily Wrap for 10/21/2022

This is a summary of links featured on Quantocracy on Friday, 10/21/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • QuantConnect Integration with MlFinLab [Hudson and Thames]

    Announcing that MlFinLab is fully integrated into the powerful backtesting and execution platform of QuantConnect! At the start of 2022, we set out to improve the user experience across all of our products and to improve the accessibility of our libraries. This meant integrations into platforms that have a strong community, historical simulations, data feeds, and live execution. QuantConnect was a
  • Correlation Matrices Denoising: Results from Random Matrix Theory [Portfolio Optimizer]

    The estimation of empirical correlation matrices in finance is known to be affected by noise, in the form of measurement error, due in part to the short length of the time series of asset returns typically used in their computation1. Worse, large empirical correlation matrices have been shown to be so noisy that, except for their largest eigenvalues and their associated eigenvectors, they can

Quantocracy’s Daily Wrap for 10/19/2022

This is a summary of links featured on Quantocracy on Wednesday, 10/19/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Best Defensive Asset Class [Allocate Smartly]

    In this post we look at what major asset classes have proven to be the best defensive choice in months when the market has fallen over the last 50+ years. Well look at multiple government and corporate bond assets, diversified commodities, gold and the US dollar. The results? As expected, a mixed bag. Investors who blindly assumed any defensive asset was a sure thing in times of market stress
  • Stock-Bond Correlation, an In-Depth Look [Quantpedia]

    The recent surge in global inflation sent shock waves across financial markets and affected the complicated relationship between stocks and bonds. Today, we would like to present you with a review of two interesting papers, which provide both a deep and easy-to-understand examination of the correlation structure of those two main asset classes. The first paper reviews specifics in various parts of
  • Causality: interest rates and fixed income assets [Quant Dare]

    The blog has previously addressed interest rates in a post that splits the yield rate curve into three relevant components. This time this post tries to identify the influence of interest rates on fixed income assets by using the Granger causality test. Interest rates obviously have a strong impact on fixed income assets because they are the base to compute their prices. However, can we find any

Quantocracy’s Daily Wrap for 10/18/2022

This is a summary of links featured on Quantocracy on Tuesday, 10/18/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Finding and analyzing free stock index data with Python and EDGAR [Wrighters.io]

    A stock index is just a list of stocks. But an index is a special list because investors use it to make investing decisions. An index is constructed via rules about stocks to include, how much to include, and when to include (or remove it). Finding this data, especially for more obscure indexes, can be difficult. This is especially the case if you want to find this data for free. This article will
  • Democracy: is it better for the stock market? [Alpha Architect]

    In this article, we examine the research that addresses the question of whether or not democracy leads to better possible outcomes for the stock market. Democracy and Stock Returns Xun Lei and Tomasz Piotr Wisniewski SSRN Working Paper A version of this paper can be found here Want to read our summaries of academic finance papers? Check out our Academic Research Insight category. What are the

Quantocracy’s Daily Wrap for 10/17/2022

This is a summary of links featured on Quantocracy on Monday, 10/17/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Crypto-Trading with REST, part 1 [Financial Hacker]

    Many brokers and exchanges can nowadays be accessed online with a REST API. The days of awkward proprietary broker APIs are coming to an end. This article is a step by step instruction of implementating a REST API interface in plain C for connecting a trading system to the Bittrex cryptocurrency exchange. Its for the Zorro platform, but the principles are also valid for other exchanges and
  • Is the Carry Trade a Diversifying Strategy? [Finominal]

    The carry trade was positive across most asset classes in YTD 2022 The correlations to the S&P 500 were low historically However, the carry trade crashed when stocks crashed, ie provided limited diversification benefits INTRODUCTION After a few years in unchartered territories, most bonds have normalized by showing positive yields again. Naturally, this implies that almost all bonds will have

Quantocracy’s Daily Wrap for 10/16/2022

This is a summary of links featured on Quantocracy on Sunday, 10/16/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

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

    If you take all available VIX futures data and create a scatterplot of daily settlement prices as a function of time to expiration you will see a curious pattern: Yes, there are clear clusters in prices. But what do these clusters mean? The simple explanation is that the VIX term structure passes from one regime to another and there is noise around these regimes. There is a low-volatility flat,
  • Volatility and Expected Range, Are They The Same? [Only VIX]

    This is not a post to correct some abstract mathematical technicality, or a semantic point. Rather I hope to shed some light on widespread mis-estimation of important risk metric that I often see on the internet. For example this double-decker of ignorance popped up on my twitter feed today. VIX as you know is an annualized measure and in order to calculate an expected daily move – that is from
  • Jobs growth as trading signal [SR SV]

    Employment growth is an important and underestimated macro factor of financial market trends. Since the expansion of jobs relative to the workforce is indicative of changes in slack or tightness in an economy it serves as a predictor of monetary policy and cost pressure. High employment growth is therefore a natural headwind for equity markets. Similarly, the expansion of jobs in one country
  • Lottery Demand and the Asset Growth Anomaly [Alpha Architect]

    It is well documented in the literature that over the long term, low-investment firms have outperformed high-investment firmswith the negative relation between asset growth (AG) and future stock returns particularly featured by the overvaluation of high AG stocks. This finding has led to the investment factor (CMA, or conservative minus aggressive) being incorporated into the leading asset

Quantocracy’s Daily Wrap for 10/13/2022

This is a summary of links featured on Quantocracy on Thursday, 10/13/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • How to Improve Post-Earnings Announcement Drift with NLP Analysis [Quantpedia]

    Postearnings-announcement drift (abbr. PEAD) is a well-researched phenomenon that describes the tendency for a stocks cumulative abnormal returns to drift in the direction of an earnings surprise for some time (several weeks or even several months) following an earnings announcement. There have been many explanations for the existence of this phenomenon. One of the most widely accepted
  • $NDX Performance After 5 Down Days and a 150-Day Low [Quantifiable Edges]

    The two big up days to start last week have now been followed by 5 down days in a row. And the 5-day selloff has put the NDX at a new bear-market closing low. The study below looks at other times since 1990 that NDX closed down for the 5th consecutive day and at a 150-day low. NDX performance after 5 down days and a 150-day low These results suggest an upside tendency. Five days later all 11
  • Sell in May and go away Just won t go away [Quant Dare]

    In this post we are going to revisit (check previous post) the catchy market maxim sell in May and go away. After 2 bear markets in the last 3 years and yet another red September, once again, here I am in October, wishing I had sold in May. Lets simulate the different variations of this seasonal anomaly and see how it is holding up the last 25 years. Investment Thesis The Sell in

Quantocracy’s Daily Wrap for 10/11/2022

This is a summary of links featured on Quantocracy on Tuesday, 10/11/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Building a Raspberry Pi Cluster for QSTrader Using SLURM – Part 4 [Quant Start]

    In the previous article in this series we installed and configured SLURM to enable us to parellelise work loads. In this article we will be using SLURM to install QSTrader on all our secondary nodes. This will enable us to multiple run parameter sweeps for backtests of single or multiple strategies in parallel. By the end of this article we will have QSTrader installed and running the example

Quantocracy’s Daily Wrap for 10/07/2022

This is a summary of links featured on Quantocracy on Friday, 10/07/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Random Forests and Boosting for ARCH-like volatility forecasts [Sarem Seitz]

    In the last article, we discussed how Decision Trees and Random Forests can be used for forecasting. While mean and point forecasts are the most obvious applications, they might not always be the most useful ones. Consider the classic example of financial returns, where the conditional mean is hard, if not impossible, to predict. Conditional variance on the other hand has been shown to exert some
  • Conditional Portfolio Optimization [EP Chan]

    Previously on this blog, we wrote about a machine-learning-based parameter optimization technique we invented, called Conditional Parameter Optimization (CPO). It appeared to work well on optimizing the operating parameters of trading strategies, but increasingly, we found that its greatest power lies in its potential to optimize portfolio allocations. We call this Conditional Portfolio
  • Momentum Everywhere, Including Emerging Markets [Alpha Architect]

    In order for investors to determine which of the hundreds of factors in what John Cochrane famously called the zoo of factors were worthy of investment, Andrew Berkin and I set out seven criteria in our book Your Complete Guide to Factor-based Investing. For a factor to be considered, it must meet all the following tests. To start, it must provide explanatory power to portfolio returns
  • Research Review | 7 Oct 2022 | Interest Rates and Inflation [Capital Spectator]

    The Factor Multiverse: The Role of Interest Rates in Factor Discovery Jules H. van Binsbergen (University of Pennsylvania), et al. September 2022 We study the importance of the decline in interest rates in the discovery of asset pricing anomalies. We investigate 153 discovered anomalies as well as 1,395 potential undiscovered anomalies and find that absent the decline in interest rates, the asset

Quantocracy’s Daily Wrap for 10/04/2022

This is a summary of links featured on Quantocracy on Tuesday, 10/04/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Multi Strategy Management for Your Portfolio [Quantpedia]

    If you follow Quantpedias blogs, you probably know that Quantpedia PRO already contains multiple risk management and portfolio construction tools for your quantitative investment strategies. For example, Crisis Hedge can find you suitable investment hedges for negative months and for bear markets. The Correlation Analysis report, on the other hand, reviews your model portfolios correlation
  • Factor Olympics Q3 2022 [Finomial]

    Value is leading the performance scoreboard in YTD 2022 Low volatility is the worst-performing factor Oddly, the value and low volatility factors are strongly positively correlated 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 academic research supports the existence of positive excess
  • Transaction costs and portfolio strategies [SR SV]

    Transaction costs are a key consideration for the development of trading strategies; and not just in final profitability checks. Indeed, disregard for trading costs at the design stage leads to excessive reliance on fleeting small-scale characteristics for return predictors. It also skews the conventional efficient frontier of portfolio choice towards risky trading strategies. A realistic