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Quantocracy’s Daily Wrap for 03/12/2022

This is a summary of links featured on Quantocracy on Saturday, 03/12/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Factor Investing Premiums and the Economic Cycle [Alpha Architect]

    Academic research has found that factor premiums are both time-varying and dependent on the economic cycle. For example, the authors of the 2017 study Fama-French Factors and Business Cycles examined the behavior of six Fama-French factorsmarket beta (MKT), size (SMB), value (HML), momentum (MOM), investment (CMA), and profitability (RMW)across business cycles, splitting them into four

Quantocracy’s Daily Wrap for 03/08/2022

This is a summary of links featured on Quantocracy on Tuesday, 03/08/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Factor Performance in Cold War Crises – A Lesson for Russia-Ukraine Conflict [Quantpedia]

    The Russia-Ukraine war is a conflict that has not been in Europe since WW2. And it has great implications not only on human lives but also on security prices. It bears numerous characteristics of the cold war crises, where two nuclear powers (Soviet Union and USA/NATO) were often very close to hot war or were waging a proxy war in 3rd countries. We thought it might be wise to look at similar
  • New Accounting Standards and Factor Investing [Alpha Architect]

    How well do quantitative investors navigate around the changes to the accounting standards that are endemic to the financial data used in quantitative strategies? The numbers reported on financial statements are wholly governed by regulation and by each firms interpretation of those accounting standards. So do quants stick to their empirical evidence on old data methods or do they react in

Quantocracy’s Daily Wrap for 03/07/2022

This is a summary of links featured on Quantocracy on Monday, 03/07/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • How to gamble with demons (and make money doing it) [Raposa Trade]

    A demon comes to you one night giving you a simple dice game to play. You're offered the chance to wager your wealth and receive a 50% increase if you roll a 6, 5% bump if you roll 2-5, or lose 50% if you roll a 1. You also get 300 rolls and get to compound your wealth with each roll of the die. Do you play? Most people would jump at this opportunity. They'd look at the average of these
  • Commodities vs Commodity ETFs [Factor Research]

    The average correlation between oil and oil ETFs was only 0.8 Gold ETFs provide better exposure to gold than oil ETFs to oil Gold mining stocks are hybrids that feature gold and equity beta INTRODUCTION As the war in Russia unfolded, crude oil (WTI) breached $100 per barrel, which was last seen in 2014. Inflation was already at a multi-decade-high level in most developed countries before this

Quantocracy’s Daily Wrap for 03/04/2022

This is a summary of links featured on Quantocracy on Friday, 03/04/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Bittrex API – An Introductory Guide [Algo Trading 101]

    Bittrex API is a method that allows us to automatically trade cryptocurrencies on Bittrex via code. What is Bittrex? Bittrex is an online cryptocurrency exchange platform that allows its users to trade over 700 trading pairs. As one of the oldest US-based exchanges, Bittrex is known for its excellent safety practices and transaction speed. Is Bittrex API free? Creating a Bittrex account and using
  • Active mutual funds underperform passive funds, again [Mathematical Investor]

    In a previous Mathematical Investor blog, we presented data on actively managed fund versus passive fund performance over various time horizons, based on the February 2019 Morningstar Active-Passive Barometer report. These data showed, for instance, that only 12.6% of actively managed U.S. large value funds outperformed a comparable passive index fund over a 3-year horizon, and only 8.3% did so
  • How to manage systemic risk in asset management [SR SV]

    Systemic crises are rare but critical for long-term performance records. When the financial system fails, good trades become bad trades and many sensible investment strategies incur outsized losses due to deleveraging and liquidation pressure. Managers have two principal sets of tools to address systemic risk. The first is estimation and control of tail risk. The second is a contingency plan for
  • Factor Investing: Are Internally Generated Intangibles Worthless? [Alpha Architect]

    As mind-bending as it sounds, although a companys internally generated intangible investments generate future value, they are currently not accepted as assets under US GAAP. Omission of this increasingly important class of assets reduces the usefulness and relevance of financial statement analysis that uses book value. In fact, Amitabh Dugar and Jacob Pozharny, authors of the December 2020

Quantocracy’s Daily Wrap for 03/03/2022

This is a summary of links featured on Quantocracy on Thursday, 03/03/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 03/01/2022

This is a summary of links featured on Quantocracy on Tuesday, 03/01/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Where Tactical Asset Allocation Stands Now (Feb 28, 2022) [Allocate Smartly]

    It always feels a little offensive talking dollars and cents at times like this (*), but we hope that by helping investors to have a concrete strategy, we can at least take this one stress off the table. We track 60+ Tactical Asset Allocation (TAA) strategies, allowing us to draw some broad conclusions about TAA as a style. So far, TAA has followed the pattern investors have come to expect:
  • Is 60:40 a dead parrot? Or just resting? [Investment Idiocy]

    Very brief blog post this month; I'm deep into book writing mode at the moment. Chanelling Clif Assness, I'm just going to present a few charts and lead you to draw your own conclusions. Excess / futures returns from portfolio of 60% S&P 500, 40% US Ten year treasuries (Authors own data) Jorda et al The rate of return on everything QJE 2019 One year rolling correlation of

Quantocracy’s Daily Wrap for 02/28/2022

This is a summary of links featured on Quantocracy on Monday, 02/28/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Momentum in Emerging Markets [Factor Research]

    Long-short momentum investing highlights attractive performance in Asia and emerging markets However, realized excess returns are significantly lower than theoretical ones Likely explained by transaction costs INTRODUCTION Momentum has been shown to generate attractive excess returns across eight different markets and asset classes by AQR, a quantitative asset manager. Christopher Geczy and
  • Follow The Leader To Make Money In Stocks [Decoding Markets]

    Theres a reason that international traders, whether theyre in Tokyo, Singapore, or London, follow the US markets. The US is the hub of global finance. Its on Wall Street where everything is happening. Watching the reaction of European markets to the opening of US markets demonstrates this. When the US market bell rings, theres a spike in volume (and volatility) across European assets.

Quantocracy’s Daily Wrap for 02/26/2022

This is a summary of links featured on Quantocracy on Saturday, 02/26/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Beware of Excessive Leverage – Introduction to Kelly and Optimal F [Quantpedia]

    Most investors focus solely on the profitability of their investment strategy. And, even though having a profitable strategy is important, it is not everything. There are still numerous other things to consider. One of them is the size of the investment. The investment size can increase or decrease the profitability of a strategy, so it is essential to choose it right. The following article is our
  • Re: Ukraine [Only VIX]

    As I am sure all of you know Russia has began a full scale war against my home country Ukraine. Please make no mistake – Putin's goal in not to stop the expansion of NATO, not to install puppet government, and certainly not to bring peace. The goal is genocide of Ukrainian people. When Ukraine was under Russian communist occupation, Russians started off with killing of political leaders,
  • Is there any edge in holding stocks overnight? [Rotating Stocks]

    Holding stocks overnight is when we buy the close and sell the following day on the open. Is there any edge in this approach in comparison to buying the open and selling the close. Today we will check this phenomenon. We will check the performance of the SPY, then we will try to check it on individual stocks. What is holding stocks overnight? There is a common knowledge that the stock market

Quantocracy’s Daily Wrap for 02/23/2022

This is a summary of links featured on Quantocracy on Wednesday, 02/23/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Developing systematic smart beta strategies for crypto assets [Artur Sepp]

    I am delighted to share the video from my QuantMinds presentation that I made in Barcelona in December 2021. Many thanks to QuantMinds organizers for allowing me to share this video. First, it was nice to attend the onsite conference in a while and to meet old friends and colleagues. I was positively surprised by how many people attended. Many thanks to organizers for making it happen during these
  • What’s the Relation Between Grid Trading and Delta Hedging? [Quantpedia]

    Delta hedging is a trading strategy that aims to reduce the directional risk of short option strategy and reach a so-called delta-neutral position. It does so by buying or selling small increments of the underlying asset. Similarly, grid trading is a trading strategy that buys/sells an asset depending on its price moves. When the price falls, it buys and sells when the price rises a certain amount
  • Toward an efficient hybrid method for pricing barrier options [Artur Sepp]

    I am excited to share the latest paper with Prof. Alexander Lipton. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4035813 We find the semi-analytical solution to one of the unsolved problems in Quantitative Finance, which is to compute survival probabilities and barrier option values for two-dimensional correlated dynamics of stock returns and stochastic volatility of returns. An analytical
  • Does diversification always benefit investors? No. [Alpha Architect]

    Diversification has been around since the early 1950s and is often considered a free lunch in finance. But is that actually the case? Weve highlighted here and here that the reality is more complicated than the theory. Consider the two basic assumptions about correlations in the context of mean-variance optimization: (1) Pair-wise correlations are assumed to be symmetrical relative to
  • Black-Litterman Sector Allocation [Quant Dare]

    Incorporating market expectations and forecasts into asset allocation used to be more of an art than an analytical process in the 80s. In this post we will review Fisher Blacks elegant and very practical solution to portfolio construction, going through a sector allocation example. The Black Litterman Model The BL (Black-Litterman) model can be considered one of the greatest contributions in

Quantocracy’s Daily Wrap for 02/18/2022

This is a summary of links featured on Quantocracy on Friday, 02/18/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Are There Seasonal Intraday or Overnight Anomalies in Bitcoin? [Quantpedia]

    At Quantpedia, we love seasonality effects, and our screener includes several strategies that exploit them. These anomalies are fascinating since they usually offer a favorable risk and reward ratio and are commonly invested only during short periods. Frequently, these strategies are valuable additions to portfolios because they are not that sensitive to overall market performance. This short
  • Factor Investing: Is a Human Capital Factor on the Horizon? [Alpha Architect]

    From 1991 to 2018, capital expenditures as a percentage of total sales remained relatively flat, at about 10 percent. On the other hand, personnel expenses almost doubled during that time. In fact, by 2018 personnel expenses (the costs for hiring, wages, salaries, and bonuses; social security and insurance costs; costs for employee training and development; perquisites like catering and workwear;