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Quantocracy’s Daily Wrap for 11/26/2019

This is a summary of links featured on Quantocracy on Tuesday, 11/26/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Adaptive VIX Moving Average [CSS Analytics]

    One of the challenges with technical or quantitative analysis is to identify strategies that can adapt to different market regimes. The most obvious is a change in the forecast or implied volatility as proxied by the VIX. During more volatile periods we would expect more signal noise and during less volatile periods we would expect less signal noise. But how do we capture this in a strategy? One
  • Enterprise Multiples and Equity Country Allocations [Alpha Architect]

    The use of valuation multiples in selecting equity securities is well established in the literature, and weve covered the research on enterprise multiples here (here is a recent JPM on the topic). However, there are relevant questions as to the effectiveness of multiples when applied to national indexes in the service of country allocation. Contrary to popular opinion, studies show that not
  • Diversification: More Than “What” [Flirting with Models]

  • Are Earnings Forecasts of Sell-side Analysts Biased? [Alpha Architect]

    There is a substantial body of evidence linking various accounting ratios to expected stock returns. One explanation of the links is that they could be explained by the accounting ratios being associated with systematic sources of risk. Alternatively, they could be associated with mispricing that arises from systematically biased investor expectations (see here for a discussion on this topic).

Quantocracy’s Daily Wrap for 11/25/2019

This is a summary of links featured on Quantocracy on Monday, 11/25/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Inverview with @PaulNovell: Investing for a living, financial independence and early retirement [System Trader Show]

    It happens very often that we work because we dont see any alternatives. Our job may be annoying as hell, we may even hate it, but the reality seems like we dont have any other options. We have a mortgage, we have a family to maintain, or our qualifications arent allowing us to do something new. So we dont dare to do something new, and we dont have a plan, were just drifting
  • Do Activist Investors Create Value? [Factor Research]

    Shareholder activism has not grown from a campaign or AUM perspective recently Activist funds have not generated attractive returns The lack of outperformance is challenging to explain INTRODUCTION Active fund managers today are like deer caught in the headlights of oncoming traffic as the exchange-traded fund (ETF) industry is expanding its product range to all investment strategies and grabbing

Quantocracy’s Daily Wrap for 11/23/2019

This is a summary of links featured on Quantocracy on Saturday, 11/23/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Pivot Point Strategy [Quant Insti]

    In this project, we analyze different intraday trading strategies with Pivot Points. After defining different ways of calculating the Pivot Point, we do a Backtest with the most classic strategies and a different variant to those normally taught in textbooks. To learn about Pivot Point and how to use it to predict movement in trade markets, read this blog. This article is the final project
  • Research Review | 22 November 2019 | Factor Investing Strategies [Capital Spectator]

    ETF Momentum Frank Weikai Li (Singapore Management University), et al. October 12, 2019 We document economically large momentum profits when sorting ETFs on returns over the past two to four years. A value-weighted, long-short strategy based on ETF momentum delivers Carhart (1997) four-factor alphas of up to 1.20% per month. Neither cross-sectional stock momentum nor co-variation with
  • Basic factor investment for bonds [SR SV]

    Popular factors for government bond investment are carry, momentum, value and defensive. Carry depends on the steepness of the yield curve, which to some extent reflects aversion to risk and volatility. Momentum relates to medium-term directional trends, which in the case of fixed income are often propagated by fundamental economic changes. Value compares
  • The Investor’s Podcast: Factor Investing (Jack) [Alpha Architect]

    Recently I was invited to talk with Stig and Preston on The Investors Podcast. I thank them for the opportunity and enjoyed the conversation! Below are some of the topics we discussed: What is factor investing? Which factors have historically performed the best? Should one use a single factor or multiple factors? How long should the holding period be for a position? Here is a link to their

Quantocracy’s Daily Wrap for 11/21/2019

This is a summary of links featured on Quantocracy on Thursday, 11/21/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • It’s time for a modern, standardized trading interface, suitable for the web-age [Ran Aroussi]

    In this post, I share my vision for an Open Trading standard for communicating with online brokers using modern technologies. While looking for a way to add support for multiple brokers and data vendors to my open source Python trading library, I discovered that there's currently no way to communicate with various brokers without re-writing most of the code responsible for getting market
  • Are Value, Carry and Momentum Regime Dependent? [Alpha Architect]

    Over the past decade academics and practitioners alike have argued that multi-factor portfolios offer significant benefits to investors looking for enhanced and more diversified solutions. Among the papers making this argument is The Death of Diversification is Greatly Exaggerated, co-authored by my colleague Jared Kizer and Antti Ilmanen of AQR Capital. Their work was awarded the best

Quantocracy’s Daily Wrap for 11/20/2019

This is a summary of links featured on Quantocracy on Wednesday, 11/20/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Podcast w/ Andreas @Clenow: Trend Following Is About Taking A Lot Of Bets On A Large Number Of Markets [Meb Faber]

    Guest: Andreas Clenow is the Chief Investment Officer of ACIES Asset Management AG. He manages alternative investment funds for institutional and qualified investors. He has served as Nordic Manager for the Analytics Consulting division of Reuters Consulting, covering Sweden, Norway, Denmark, Finland, Iceland and the Baltics before serving as Global Head of Equity and Commodity Analytics Modeling,
  • Systematic Tactical Asset Allocation: An Introduction [Quant Start]

    Systematic trading is often synonymous with short-term trading frequencies in the retail quant trading space. Daily and intraday strategies tend to receive the bulk of the community's attention. The popularity of systematic cryptocurrency trading has put a further emphasis on short term trading methods. Higher frequency strategies may be appropriate for active traders who wish to enhance
  • One Look At What Recent SPX Persistence Might Mean [Quantifiable Edges]

    One compelling study that triggered Tuesday in the Quantifinder suggested the recent persistent upmove is unlikely to abruptly end. (This is a theme we have seen many times over the years.) It considers what happens after the market moves up at least 5 days in a row to a 50-day high, and then pulls back. 2019-11-20-1 We see here a decent edge that becomes stronger and more consistent as you look
  • Volatility Clustering with Opening Range Breakout (ORB) [Oxford Capital]

    Concept: Opening Range Breakout (ORB) with Volatility Clustering (Large price moves tend to be followed by large price moves, and small price moves tend to be followed by small price moves). Research Question: Can we improve performance of the original volatility clustering model via Opening Range Breakout (ORB)? Specification: Table 1. Results: Figure 1-4. Trade Setup: We identify large price

Quantocracy’s Daily Wrap for 11/18/2019

This is a summary of links featured on Quantocracy on Monday, 11/18/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Dumb (Timing) Luck of Smart Beta [Flirting with Models]

    In past research notes we have explored the impact of rebalance timing luck on strategic and tactical portfolios, even using our own Systematic Value methodology as a case study. In this note, we generate empirical timing luck estimates for a variety of specifications for simplified value, momentum, low volatility, and quality style portfolios. Relative results align nicely with intuition: higher
  • AI & Data Science in Trading Conference – March 16-18 in NYC

    AI & Data Science in Trading brings together experts in the use of AI and advanced data analytic techniques within asset management, primarily for finding alpha, managing risk and optimizing portfolios. Now in its fifth edition, rotating between the global financial hubs of NYC and London, this high level conference provides cutting edge sessions from asset managers and investment banks with
  • Is Alpha a Convergent or Divergent Thought? [Two Centuries Investments]

    Divergent thinking is what we learn in school when we are paying attention. It allows us to solve hard problems with one right answer. Convergent thinking is what happens when we stop paying attention and start doodling. Convergent thinking produces many answers, none of which are technically correct but some of which are potentially groundbreaking. It is hard to do divergent thinking when
  • Parabolic SAR – An Introduction [Quant Insti]

    In the market, it is crucial to spot the trend, but it is equally important to detect when the trend ends. Getting out of the trade is more difficult than entering the trade. In this blog, we will talk about one such technical indicator, the Parabolic SAR indicator, which helps in identifying when the trend ends. The Parabolic SAR or Parabolic stop and reverse was developed by J. Welles Wilder.
  • Equity vs Bond Indices [Factor Research]

    Bond indices are frequently portrayed as featuring a lower quality composition than equity indices Analysing equity and bond indices in the US and emerging markets confirms this view Perhaps this explains why there is some alpha generation in fixed income INTRODUCTION While almost all fund managers in equities across market segments underperform their benchmarks over time, the data for fixed

Quantocracy’s Daily Wrap for 11/16/2019

This is a summary of links featured on Quantocracy on Saturday, 11/16/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • IPO Exploration: Part 1 [Reproducible Finance]

    Inspired by recent headlines like Fear Overtakes Greed in IPO Market after WeWork Debacle and This Years IPO Class is Least Profitable since the Tech Bubble, today well explore historical IPO data and next time well look at the the performance of IPO driven-portfolios constructed during the ten-year period from 2004 – 2014. Ill admit Ive often wondered how a portfolio that allocated
  • Endogenous market risk: updated primer [SR SV]

    Endogenous risk arises from the interaction of financial market participants, as opposed to traded assets fundamental value. It often manifests as feedback loops after some exogenous shock. An important type of endogenous market risk is setback risk, which refers to the asymmetry of the upside and downside potential of a trade that arises from market positioning. Setback risk is a proclivity to
  • State of Trend Following in October [Au Tra Sy]

    A negative October takes the State of Trend Following index in the red for the year. Please check below for more details. Detailed Results The figures for the month are: October return: -3.92% YTD return: -3.23% Below is the chart displaying individual system results throughout October: StateTF October And in tabular format: System October Return YTD Return BBO-20 -4.67% 7.06% Donchian-20 -6.32%

Quantocracy’s Daily Wrap for 11/14/2019

This is a summary of links featured on Quantocracy on Thursday, 11/14/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Podcast: Jim Simons – The pinnacle of trading greatness w/ author @GZuckerman [Chat With Traders]

    Gregory Zuckerman is a writer at the Wall Street Journal and author of The Man Who Solved the Market: How Jim Simons Launched The Quant Revolution. For anyone unfamiliar, Jim Simons is the brilliant-minded mathematician who founded hedge fund Renaissance Technologies. Using quantitative models and with billions in AUM, Renaissance has averaged annualized returns of net 39% since 1988. And these
  • How to avoid unwanted curve fitting during backtest [Philipp Kahler]

    Whenever you develop an algorithmic trading strategy, curve fitting is one of the most dangerous hazards. It will lead to severe losses in real time trading. This article will show you some ways to detect if the performance of your algorithmic trading strategy is based on curve fitting. Curve fitting what is it? Every algorithmic trading strategy will have some parameters. There is no way
  • The Investment Factor and Expected Returns [Alpha Architect]

    It is well documented in the literature that over the long term, low-investment firms have outperformed high-investment firms.(1) This finding has led to the investment factor (CMA, or conservative minus aggressive) being incorporated into the leading asset pricing modelsthe four-factor Q model (market beta, size, investment and profitability), the Fama-French five-factor model that adds value,
  • Hiring a Software Developer to Code Up a Trading Strategy [Quant Start]

    At QuantStart we place an emphasis on fully automated systematic trading and the processes that surround it. However we should be careful to distinguish between the separate concepts of systemisation and automation. The former involves a trading strategy that can be codified into a set of rules, which canand often iscalculated and traded in a manual fashion. The latter encompasses the case

Quantocracy’s Daily Wrap for 11/13/2019

This is a summary of links featured on Quantocracy on Wednesday, 11/13/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Trend-following vs. Momentum in ETFs [Alvarez Quant Trading]

    In Tactical Asset Allocation (TAA) or Dual Momentum (DM) strategies, they often will use trend-following or momentum to decide whether to invest in asset or not. I have two questions. One, how often does either trend-following or momentum they beat buy and hold? Two, of the two which one beats the other more often? Trend-Following Rules Buy Last day of month Close is greater than the 10-month
  • Investment, Expected Investment, and Expected Stock Returns [Alpha Architect]

    A new DFA article by Rizova and Saito (2019, Investment and Expected Stock Returns) (1) rehashes previous arguments in Fama and French (2006, 2015) on the investment factor. The core arguments are as follows: Valuation theory predicts that expected investment is negatively correlated with expected return, all else equal; and Current asset growth is a good proxy for expected investment.

Quantocracy’s Daily Wrap for 11/12/2019

This is a summary of links featured on Quantocracy on Tuesday, 11/12/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Kurtosis and expected returns [Investment Idiocy]

    In my last post, I stated my intention to write a series of posts about skew. Slight change of plan, since one loyal reader suggested that I write about kurtosis. I thought that might be fun, since I haven't thought about kurtosis much, and the literature on kurtosis isn't as well developed. It turns out that considering both together leads to some very interesting results. The plan is
  • The Man Who Solved the Market Notes [Systematic Edge]

    When it comes to the worlds most secretive hedge fund any content is worthwhile to read. I finished the book is 3 days and had to re-read a couple more chapters to ensure I fully absorbed the couple nuggets in there. I would recommend this book to everyone! The mystery behind how Simons discovered the truth is shrouded in mystery. Even googling about what they traded doesnt yield many
  • Investor IQ Website is Live (In Beta) [CSS Analytics]

    For readers interested in getting signals and analytics on hundreds of ETFs and individual stocks our Investor IQ website is currently live and free during our beta-testing phase. We will be adding new data and analytics gradually over time as well as improving website functionality. The Economic Model is currently hosted on the site and predictions are updated every 2-3 days in real-time.
  • Are Early Stage Investors Biased Against Women? [Alpha Architect]

    Recent studies of startup activity in the U.S. find that only roughly 1015% of startups are founded by women. There are a number of potential explanations including gender differences in technical training or risk preferences. However, many have also speculated that part of the gender gap may, in fact, be due to a lower propensity for investors to fund female entrepreneurs seeking capital. This