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Quantocracy’s Daily Wrap for 06/19/2021

This is a summary of links featured on Quantocracy on Saturday, 06/19/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Buy&Hold? No, Buy&Sell! [Financial Hacker]

    Theres no doubt that buying and holding index ETFs is a long-term profitable strategy. But it has two problems. It does not reinvest profits, so the capital grows only linearly, not exponentially. And it exposes the capital to the full rollercoaster market risk. A sure way to go out of the market in a downtrend, and invest the profits back in an uptrend would be (almost) priceless. Markos
  • Many explanations for the same fact [Alex Chinco]

    Asset-pricing research consistently produces many different explanations for the same empirical facts. As a rule of thumb, you should expect asset-pricing researchers to wildly overachieve. Behavioral researchers can typically point to several psychological biases which might explain the same anomaly. e.g., it is possible to argue that the excess trading puzzle is due to a preference for gambling,

Quantocracy’s Daily Wrap for 06/18/2021

This is a summary of links featured on Quantocracy on Friday, 06/18/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Can astrology predict financial markets? (Of course not) [Mathematical Investor]

    In a previous MathInvestor article, we mentioned how absurd it would be if someone offered predictions of stock or bond prices or cryptocurrency rates based on astrological signs. Consider for a moment that financial market prices are based on a confluence of many thousands of factors worldwide, including developments in science and technology, changes in consumer sentiment and preferences,
  • The Performance of Volatility-Managed Portfolios [Alpha Architect]

    As far back as 1976, with the publication of Fischer Blacks Studies of Stock Price Volatility Changes financial economists have known that volatility and returns are negatively correlated. This relationship results in the tendency to produce negative equity returns in times of high volatility. In addition, the research, including the 2017 study Tail Risk Mitigation with Managed

Quantocracy’s Daily Wrap for 06/17/2021

This is a summary of links featured on Quantocracy on Thursday, 06/17/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Serenity DevOps #1 – Motivation [Kyle Downey]

    Serenity's production server is a Linux box sitting next to my desk which runs Ubuntu's microk8s Kubernetes distribution. It runs 24×7 collecting tick data from several cryptocurrency exchanges and once a day uploads the tick data to Azure Blob Storage. This presents a problem: this highly valuable, impossible-to-reproduce data is not read that often, and I have already had several

Quantocracy’s Daily Wrap for 06/16/2021

This is a summary of links featured on Quantocracy on Wednesday, 06/16/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • More ideas for ranking methods on a monthly S&P500 Stock Rotation Strategy [Alvarez Quant Trading]

    My last post on Different ranking methods for a monthly S&P500 Stock Rotation Strategy generated lots of emails on other ideas to try. Below are the results of these ideas Base Rules Backtest from 1/1/2007-12/31/2020. Buy It is the last trading day of the month Stock is a member of the S&P500 index Stock is above the 200-day moving average (spreadsheet has results without this rule) The
  • Automating cryptocurrencies investment [Quant Dare]

    Who has never heard about cryptocurrencies: Bitcoin, Ethereum, Cardano, or even the latest ones, such as Shiba or Safemoon? The investors are rapidly increasing their positions in those assets, although investing in them is usually a pain in the neck. These assets have a high volatility and their movements dont follow any traditional market rule and cryptocurrencies markets are not efficient.
  • Podcast with Ernie Chan (@ChanEP): Predicting profitability using machine learning [Better System Trader]

    Quant trader Ernie Chan from PredictNow.ai joins us to discuss how to predict the profitability of trades using machine learning, including: Unconditional probability and the problem with win% in backtest reports, Why conditional probability is much more useful for a trader and how to apply conditional probabilities to capital allocation, Why you should use Machine Learning for risk

Quantocracy’s Daily Wrap for 06/14/2021

This is a summary of links featured on Quantocracy on Monday, 06/14/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Financial Mentor’s All-Weather Quad Momentum [Allocate Smartly]

    This is an independent test of the tactical strategy All-Weather Quad Momentum (AWQM) from Todd Tresidder of FinancialMentor.com. Many of our members came to us from Financial Mentor, so its fitting that we add a strategy to our platform that demonstrates his approach to asset allocation. Backtested results from 1970 follow. Results are net of transaction costs (see backtest assumptions).
  • Markowitz Model [Quantpedia]

    We again present a short article as an insight into the methodology of the Quantpedia Pro report this time for the Markowitz Portfolio Optimization. As usually, Quantpedia Pro allows the optimization of model portfolios built from the passive market factors (commodities, equities, fixed income, etc.), systematic trading strategies and uploaded users equity curves. The current report helps
  • Can Hedge Funds Successfully Time Factors? [Alpha Architect]

    This study pulls together several threads in the academic literature: (1) the persistence of hedge fund outperformance; (2) the apparent use of time-varying beta exposures by hedge funds, where betas are predicated on conditions such as leverage, carry trade, major events and conditions in the equity market; and (3) the timing of equity and market factors, as a strategy. The research summarized in
  • Create a Personal Portfolio/Wealth Simulation in Python [Python For Finance]

    This post will introduce the first part (of multiple) where we build up a personal finance model to help simulate future time periods based on certain chosen input variables. We will input variables such as our current investable asset base, our annual salary, expected monthly inflows and outflows and a range of other relevant values. Firstly, after our necessary imports, we look to start on
  • Mid-Caps The Hidden Champions? [Factor Research]

    Mid-cap stocks are less popular than small or large caps In the US, they only outperformed in one out of 10 decades Globally, they have done better, creating a conundrum for investors INTRODUCTION A few weeks ago, David Stevenson, a well-known journalist and entrepreneur, asked me about my view on mid-cap stocks. To my own surprise, I had no view. Although Ive published more than 150 research
  • Markets neglect of macro news [SR SV]

    Empirical evidence suggests that investors pay less attention to macroeconomic news when market sentiment is positive. Market responses to economic data surprises have historically been muted in high sentiment periods. Behavioral research supports the idea that investors prefer heuristic decision-making and neglect fundamental information in bullish markets, but pay more attention in turbulent

Quantocracy’s Daily Wrap for 06/12/2021

This is a summary of links featured on Quantocracy on Saturday, 06/12/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Honest Guide to Getting a Quant Job in Finance: (1) So, you want to be a Quant?! [Quant at Risk]

    They say that a journey of thousand miles commences with a single step. So, here you are, firm in your own resolutions or hesitating where to go. Graduated from a university or standing and trembling about next move in your life. Fired from one job or looking for another opportunity to seize. Battling against the wind, the haze, the misfortune that fell unexpectedly upon you, suddenly from
  • Combining Value and Profitability Factors: the International Evidence [Alpha Architect]

    My October 29, 2020, article for Alpha Architect examined the research on the profitability factor. I then reviewed the findings of the June 2020 study On the Conjoint Nature of Value and Profitability, which analyzed how combining the profitability factor with the value factor tilting the portfolios exposure to the two factorsimpacted the risk and return of a long-only U.S.

Quantocracy’s Daily Wrap for 06/10/2021

This is a summary of links featured on Quantocracy on Thursday, 06/10/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Concepts of Entropy in Finance: Transfer entropy [Quant Dare]

    The concept of entropy has many useful applications in finance such as measuring risk, uncertainty, or noise in a signal. In this post we will focus on transfer entropy, a useful tool for causal inference between financial time series. What is entropy? Entropy in general represents the uncertainty, ambiguity, and disorder of a stochastic process. The concept of entropy has been introduced in many

Quantocracy’s Daily Wrap for 06/07/2021

This is a summary of links featured on Quantocracy on Monday, 06/07/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Optimising my way out of a small fund problem – part one [Investment Idiocy]

    This is part one of a series of posts about using optimisation to get the best possible portfolio given a relatively small amount of capital. In this short post I present the idea, and discuss some issues that I need to resolve. It's a bit of a stream of conciousness! It's less of a blog post, and more my random jottings on the subject converted from scribbles to electronic prose.
  • Still Using Book to Market for a Value Metric? Read This. [Alpha Architect]

    Book to Market (B/M) has been a prominent indicator used to construct "value" tilted portfolios. The love affair with B/M started with Graham and Dodd (1934), but became the gold standard after Fama and French (1992). Historically, B/M was a reasonable ratio to express the value factor and it worked incredibly well when investors were hunting for value in steel mills, railroads, and
  • Liquid Alt Juggernauts: Worth their Salt? [Factor Research]

    Liquid alternative mutual funds only captured 10% of the market share from hedge funds The alpha generated since 2013 was essentially zero Long-short equity funds can be replicated simply via market beta + cash INTRODUCTION One of the most perplexing questions in the investment industry is why liquid alternatives have not been able to disrupt the hedge fund industry in the same way as ETFs have

Quantocracy’s Daily Wrap for 06/04/2021

This is a summary of links featured on Quantocracy on Friday, 06/04/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • This Time is Different? Consider Quantifying Subjective Priors [Alpha Architect]

    This time is different. –John Templeton "This time is different," is a sentiment that leads many investors to stray from using data analysis in their investment decision process and more towards discretionary judgment. The logic as to why data analysis techniques may not apply to different situations is often framed in the following way: These particular set of conditions have

Quantocracy’s Daily Wrap for 06/02/2021

This is a summary of links featured on Quantocracy on Wednesday, 06/02/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Linking Attribution Factors [Quant Dare]

    In the business of performance measurement, a recurrent task is the breakdown of a stream of returns into meaningful contributions from different factors, in order to identify the driving financial forces or sources of risk. Eventually, these daily contributions have to be aggregated to explain the complete period performance or the divergence between two different streams of returns. This step is
  • The Case against EM Equities [Factor Research]

    EM equities are highly correlated to US stocks & high yield bonds, limiting diversification benefits They outperform primarily when the USD is depreciating, making it a currency play The largest MSCI EM index members will experience 50% population declines INTRODUCTION Seeing latex slowly dripping out of rubber trees into wooden bowls on a plantation in Malaysia was a fascinating experience as
  • Get Green or Die Trying? [Alpha Architect]

    In 2015, 197 nations signed onto the Paris Agreement and committed to limiting global warming to less than 2 degrees C above preindustrial levels. Although the arguments are compelling, the drive to manage carbon risk presents quite a challenge for individual investors and portfolio managers. Although ESG investing spans the gamut of environmental issues, the specific case of carbon risk is