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Quantocracy’s Daily Wrap for 01/05/2022

This is a summary of links featured on Quantocracy on Wednesday, 01/05/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Finding Alpha on the Internet Part 1 [Derek Wong]

    The internet is teeming with resources for potential alpha. How do you separate the wheat from the chaff? In this series of blog posts, I will explain my process for identifying sources worth diving deeper into and extracting some kind of benefit to a portfolio or strategy. This will be a side-by-side view of my workflow as an individual. As of now, I have no idea what even to research or how I

Quantocracy’s Daily Wrap for 01/04/2022

This is a summary of links featured on Quantocracy on Tuesday, 01/04/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Is Hedged Equity a Good Replacement for the 40 ? [Simplify]

    Equity investors are drawn to the asset class with the expectation of an attractive and consistent risk premium. But with this risk premium comes the real risk of downside volatility. Traditionally, investors have paired stocks with defensive assets like bonds to provide anti-correlative benefits, but this has become increasingly more difficult in the current environment. In earlier blog posts, we
  • Most popular posts 2021 [Eran Raviv]

    Kind of sad, but the same intro which served last year, befits this year also. Littered with Corona, this year was not easy. But looking around me, I feel grateful. The following quote by Socrates comes to mind: If all our misfortunes were laid in one common heap whence everyone must take an equal portion, most people would be content to take their own and depart. On topic, as with previous
  • Factor Olympics Q4 2021 [Factor Research]

    2021 was a year of moderate factor performance Value, Quality, and Low Volatility factors generated positive returns Momentum and Size were negative 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 returns across market cycles and asset

Quantocracy’s Daily Wrap for 01/02/2022

This is a summary of links featured on Quantocracy on Sunday, 01/02/2022. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Asset Price Dynamics and Trading Strategy’s PnL Volatility [Relative Value Arbitrage]

    In a previous post, we discussed how the dynamics of assets are priced in the options prices. We recently came across a newly published article [1] that explored the same topic but from a different perspective that does not involve options. The conclusion of the new article [1] is consistent with the previous one [2]; that is, the volatilities of mean-reverting assets are smaller than those of
  • Top Ten Blog Posts on Quantpedia in 2021 [Quantpedia]

    As usual, at this time of the year, let us do a short recapitulation of posts on our blog in the previous 12 months. We have published nearly 70 short analyses of academic papers and our own research articles on this blog in 2021. We want to use this opportunity to summarize 10 of them, which were the most popular (based on the Google Analytics tool). Maybe you will be able to find something you

Quantocracy’s Daily Wrap for 12/30/2021

This is a summary of links featured on Quantocracy on Thursday, 12/30/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Using OECD Composite Leading Indicator Data to Time the Market [Allocate Smartly]

    This is a test of the Global Growth Cycle strategy from Grzegorz Link that uses OECD Composite Leading Indicator (CLI) data to time the market. Were going to present these results in an odd way. First, were going to replicate Grzegorzs test, which (as he discusses) includes a degree of lookahead bias. Due to the nature of CLI data revisions, the strategy is peeking into the
  • Hundreds of quant papers from #QuantLinkADay in 2021 [Cuemacro]

    Over the past few years Ive been tweeting a daily quant paper (or quant related library or similar) every day with the #QuantLinkADay tag. The initial objective was to make sure that my Twitter account @saeedamenfx posted at least some useful quant link of information (and to prevent Twitter followers being overrun by burger tweets, which I admittedly do tweet about and yes, I do like burgers
  • Understanding Momentum Investing [Alpha Architect]

    Momentum, the tendency of past winner stocks to outperform past loser stocks over the next several months, is one of the most well-documented and well-researched asset pricing anomalies. In our book, Your Complete Guide to Factor-Based Investing, Andrew Berkin and I present the evidence of a premium that has been persistent across long periods of time, pervasive around the globe and across

Quantocracy’s Daily Wrap for 12/29/2021

This is a summary of links featured on Quantocracy on Wednesday, 12/29/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Backtesting Is Zipline Dead? Or does it just need a reload? [Following the Trend]

    In the past year, that is by far the most common question I get. Now that Quantopian went the way of the Dodo, is Zipline dead? Should we switch to a different backtesting engine? The short answer is that the rumors of Ziplines demise are exaggerated, but lets take it from the start. My 2019 book Trading Evolved focuses on teaching you how to use Python to backtest trading strategies. In

Quantocracy’s Daily Wrap for 12/27/2021

This is a summary of links featured on Quantocracy on Monday, 12/27/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • A Primer on Grid Trading Strategy [Quantpedia]

    Grid trading is an automated currency trading strategy where an investor creates a so-called price grid. The basic idea of the strategy is to repeatedly buy at the pre-specified price and then wait for the price to rise above that level and then sell the position (and vice versa with shorting and covering). We will explore the basics and show favorable and unfavorable scenarios in the first
  • Classifying market regimes [SR SV]

    Market regimes are clusters of persistent market conditions. They affect the relevance of investment factors and the success of trading strategies. The practical challenge is to detect market regime changes quickly and to backtest methods that may do the job. Machine learning offers a range of approaches to that end. Recent proposals include [1] supervised ensemble learning with random forests,

Quantocracy’s Daily Wrap for 12/23/2021

This is a summary of links featured on Quantocracy on Thursday, 12/23/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • January Effect on Stocks [Alvarez Quant Trading]

    A member of The Crew recently asked me about the January Effect and if had I done any research on it. I had not. I have tested the December effect, which is buying the worst stocks of the year on December 1st, Should You Buy the Best or Worst YTD Stocks. From Investopedia, The January Effect is a perceived seasonal increase in stock prices during the month of January. Analysts generally
  • Our Top 5 Geeky Finance Posts for 2021 [Alpha Architect]

    We are calling it quits for the holidays. Most of us have kids and Santa is coming to town! Well talk about research and educate investors next week. Here are the Top 5 content pieces this year (Based on traffic): Even God would get fired as an Active Investor Does Gamma Hedging Actually Affect Stock Returns? Market Timing Using Aggregate Equity Allocation Signals How to Predict Stock Returns
  • Research Review | 23 December 2021 | ETFs [Capital Spectator]

    Trading Down: The Effects of Active Trading on One-Month ETF Returns Ian Gray (Loyola Marymount University) December 15, 2021 Ark Investment Management (ARK), led by CIO Cathie Wood, has risen to prominence over the past few years because of its remarkable performance. Because of requirements for active ETFs to publish daily holdings, market participants have gained unprecedented access to

Quantocracy’s Daily Wrap for 12/22/2021

This is a summary of links featured on Quantocracy on Wednesday, 12/22/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Value investing: What history says about five-year periods after valuation peaks [Alpha Architect]

    No matter how you slice it, Value stocks are historically cheap compared to the past. There have been numerous articles on this topic, such as Ryans post here, Larry Swedroes post here, and more recently, Cliff Asness post here. Cliffs post is one picture, shown below. 1 Source: https://www.aqr.com/Insights/Perspectives/Thats-it-Thats-the-Blog The image above shows the relative
  • Twas 3 Nights Before Christmas: Updated NASDAQ Version [Quantifiable Edges]

    Ive posted and updated the Twas 3 Nights Before Christmas study on the blog here several times since 2008. The study will kick in at the close today (12/21). This year I will again show the Nasdaq version of the study. While all the major indices have performed well during this period, the Nasdaq Composite has some of the best stats. NASDAQ Rally Around Christmas The stats in this table

Quantocracy’s Daily Wrap for 12/18/2021

This is a summary of links featured on Quantocracy on Saturday, 12/18/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • QuantMinds 2021 in Barcelona [Cuemacro]

    The above photo is of Montjuc Castle which has one of the best views over the city. The view from there kind of explains why the location was chosen from a strategic perspective. As a city Barcelona has many places which punctuate the skyline, whether its that castle, or the (still unfinished) Sagrada Familla, Gaudis masterpiece. One of the newer additions to the skyline is the Hotel Arts,
  • When the Close Is Not Really the Close (A Geeky Discussion) [Allocate Smartly]

    This post covers an issue rarely discussed in backtesting: the days last real-time price shown at 4pm ET often differs slightly from the days official closing price determined shortly after 4pm. This is not an Allocate Smartly issue; its an oddity of the exchanges. Every so often this difference can cause discrepancies between backtests based on the close and investors real-world
  • The Relationship Between the Value Premium and Interest Rates [Alpha Architect]

    Value stocks sharply underperformed growth stocks from 2017 to 2020, exacerbating a longer period of lackluster performance dating back to the Global Financial Crisis. The Death of Systemic Value Investing is not new news for frequent readers of the blog nor are the possible pathways to Resurrecting the Value Premium. From 2007 through August 2020, this drawdown was the deepest and longest in
  • Causal inference as a tool for publishing robust results [Alex Chinco]

    Imagine youre an asset-pricing researcher. Youve just thought up a new variable, X, that might predict the cross-section of returns. And youve regressed returns on X in a market environment e of your choosing (i.e., using data on some specific time period, country, asset class, set of test assets, etc): (1) begin{equation*} R(i) = alpha_e + beta_e cdot X(i) + epsilon_e(i) qquad

Quantocracy’s Daily Wrap for 12/15/2021

This is a summary of links featured on Quantocracy on Wednesday, 12/15/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Trading a Complete Starter System Live with @AlpacaHQ [Raposa Trade]

    Weve spent the past few posts building up the Starter System laid out in Rob Carvers book, Leveraged Trading. Weve gone from a simple moving average cross-over model, to a volatility targeting system with multiple instruments and time frames that dynamically sizes and re-positions your portfolio as market conditions change. Youve done all this work, now its time to make it pay off
  • Yet Another Improved RSI [Financial Hacker]

    John Ehlers strikes again. The TASC January 2022 issue features another indicator supposedly improved with Hann windowing the RSIH, a RSI with Hann flavour. Can it beat the standard RSI? The RSI is basically the normalized difference of price up/down movements. And its here presented Hann variant filters the price differences with a Hann window that was described in a previous article on this
  • Self-organizing maps for clustering [Quant Dare]

    We can use self-organizing maps for clustering data, trained in an unsupervised way. Lets see how. This week we are going back to basics, as we will see one of the first successfully deployed machine learning algorithms: self-organizing maps (SOM, sometimes also called Kohonen maps). This is an unsupervised technique, so we will not need any labeled data for training, just raw inputs.
  • A Stab at Fiction (Unrelated to Quant, but we support our friends) [Following the Trend]

    When I wrote my first book a decade ago, I didnt expect it to get much attention, or sales. I was in the wrong country, of the wrong nationality, I had shunned social media and was nearly invisible on the internet. On top of these obstacles, I tried out a whole new style of writing trading books. It was quite shocking when I saw that book take off and hit the number one slot on the