Quantocracy

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Recent Quant Links from Quantocracy as of 07/15/2025

This is a summary of links recently featured on Quantocracy as of Tuesday, 07/15/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Unintended Consequences of Rebalancing [Quantitativo]

    I picked up one or two pieces and examined them attentively… I then collected four or five pieces and went to Mr. Scott… I said, I believe this is gold. James W. Marshall. He found gold and died broke. James W. Marshall unintentionally sparked one of the greatest migrations in American history. In 1848, while building a sawmill on the American River, he noticed a few glimmers in
  • Weekly Research Recap [Quant Seeker]

    In-Sample and Out-of-Sample Sharpe Ratios for Linear Predictive Models (Jacquier, Muhle-Karbe, and Mulligan) Combining many weak signals can raise a models in-sample Sharpe ratio, but this paper shows it often backfires out of sample due to overfitting. Even if the combined model looks better in backtests, it tends to perform worse in live trading than simpler models built on fewer, stronger
  • How Fragile is Liquidity Across Asset Classes? [Quantpedia]

    The paper Through Stormy Seas: How Fragile is Liquidity Across Asset Classes? is a very interesting examination of how liquidity properties have evolved over the past decade. Although the average bidask spread has declined, the kurtosis and skewness of the spread distribution have increased. What does this imply? On average, markets appear more liquid; however, liquidity evaporates more
  • The Rise of 0DTE Options: Cause for Concern or Business as Usual? [Relative Value Arbitrage]

    Zero DTE (Days to Expiration) options are contracts that expire on the same day they are traded. They were introduced in 2022 and have been gaining popularity. In this post, I discuss their impact on the market and how options traders use them. Impact of Zero DTE Options on the Market Zero DTE (0DTE) options, also known as same-day expiration options, are financial derivatives with

Recent Quant Links from Quantocracy as of 07/14/2025

This is a summary of links recently featured on Quantocracy as of Monday, 07/14/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The 10 Most Popular TAA Strategies Ranked [Allocate Smartly]

    Were in a unique position to analyze the behavior of Tactical Asset Allocation (TAA) investors. We track 90+ TAA strategies. Members combine these strategies into what we call Model Portfolios. By analyzing how members form these Model Portfolios, we can understand the choices that TAA investors make when strategies are presented objectively (no marketing mumbo jumbo) and technical
  • Testing Strategies [Trading the Breaking]

    Introduction. Risks and method limitations. Circular-shift (lag-invariant) permutation test. Random sign-flip (direction-neutral) test. Stationary bootstrap of returns. White's reality check and Hansen's superior predictive ability. Jittered-entry (temporal perturbation) test. Parameter stability test. Noise injection test. Synthesis Introduction The true starting point for any
  • Research Review | 11 July 2025 | Risk Factors [Capital Spectator]

    Factoring in the Low-Volatility Factor Amar Soebhag (Erasmus University Rotterdam), et al. June 2025 Low-volatility stocks have historically delivered higher risk-adjusted returns than their high-volatility peers. Despite extensive evidence and widespread adoption in the investment industry, the so-called low-volatility factor is absent from standard asset pricing models. This paradox is
  • Volatility is a Reliable and Convenient Proxy for Downside Risk [Alpha Architect]

    Javier Estrada, author of the June 2025 study Volatility: A Dead Ringer for Downside Risk tackled a longstanding debate in finance: Is volatility (the standard deviation of returns) a good measure of the risk that investors actually care about? While volatility is the most widely used risk metric in investing, it is also heavily criticized, especially by those who argue that investors are

Recent Quant Links from Quantocracy as of 07/08/2025

This is a summary of links recently featured on Quantocracy as of Tuesday, 07/08/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Lumber-Gold Strategy [Allocate Smartly]

    The Lumber-Gold Strategy was first published a decade ago, won the 2015 NAAIM Wagner Award, and continues to be cited today. The strategy trades based on the relative strength of lumber as a leading economic indicator, versus gold. How has the strategy performed since publication? Strategy results from 1987 follow. Results are net of transaction costs see backtest assumptions. Learn about what
  • Backtesting [Trading the Breaking]

    Introduction You know, after more than a decade in this business, I've come to think of backtesting as the ultimate paradox of our profession. It's like being handed the top one lie detector in the world, only to discover it's been calibrated exclusively on your own personal brand of self-deception. Let me tell you something about that momentand every quant knows exactly which
  • Weekly Research Recap [Quant Seeker]

    Hi there. Its time for this weeks recap of top investing research, with direct links to the original sources for easy access. As mentioned last week, there wont be a Thursday post this week as Im away on holiday. Normal posting resumes next week. Commodities Political Uncertainty and Commodity Markets (Hou, Tang, Tao, and Zhang) Commodity markets often respond sharply to political
  • Should Investors Combine or Separate Their Factor Exposures? [Alpha Architect]

    If youre a factor investor, there will come a time when you will have to choose between mom and dad: Should you combine or separate your factor exposures? And make no mistake: You will have to make a decision! While theres no right answer, the way you structure your portfolio can have significant implications for returns, costs, and even your own behavior as an investor. Lets walk through
  • How Machine Learning Enhances Market Volatility Forecasting Accuracy [Relative Value Arbitrage]

    Machine learning has many applications in finance, such as asset pricing, risk management, portfolio optimization, and fraud detection. In this post, I discuss the use of machine learning in forecasting volatility. Using Machine Learning to Predict Market Volatility The unpredictability of the markets is a well-known fact. Despite this, many traders and portfolio managers continue to try to

Recent Quant Links from Quantocracy as of 07/03/2025

This is a summary of links recently featured on Quantocracy as of Thursday, 07/03/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • PCA analysis of Futures returns for fun and profit, part 1 [Investment Idiocy]

    I know I had said I wouldn't be doing any substantive blog posts because of book writing (which is going well, thanks for asking) but this particular topic has been bugging me for a while. And if you listened to the last episode of Top Traders Unplugged you will hear me mention this in response to a question. So it's an itch I feel I need to scratch. Who knows, it might lead to a
  • Testing 87 Different Stop Loss Strategies [Paper to Profit]

    Stop losses are a way of life for a trader. They are often do or die in situations of intraday and leverage trading. However, we think that the gold standard is the average trailing stop. Maybe we add an ATR band to it if we are feeling fancy. But the reality is that there are much more effective stop loss strategies that exist. And, these strategies are not part of the mainstream.
  • Learn from the Source [Anton Vorobets]

    This newsletter gives you the last opportunity to get access to the Applied Quantitative Investment Management course at the best price. I will share the first lecture on Thursday, July 3rd. After that, the subscription price will increase from the current 100 per year. The subscription will give you access to video lectures, their slides, and a chat where you can ask me questions about the
  • Weekly Research Recap [Quant Seeker]

    How Efficient are Static Multi-Asset Portfolios? Evidence from Institutional Capital Market Expectations (Bni, Bruggermann, and Kroencke) Many investors rely on fixed-weight portfolios like the 60/40 split or equal-weighted, assuming these simple approaches are efficient. This paper challenges that belief, showing that they can be improved using forward-looking data. The authors incorporate

Recent Quant Links from Quantocracy as of 06/30/2025

This is a summary of links recently featured on Quantocracy as of Monday, 06/30/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • An Empirical Analysis of Conference-Driven Return Drift in Tech Stocks [Quantpedia]

    Corporate conferences have long been recognized as pivotal events in financial markets, serving as catalysts that signal upcoming innovations and strategic shifts. Scheduled corporate events induce market reactions that can be systematically analyzed to reveal predictable return patterns. In this work, we focus on examining the return drift exhibited by technology stocks in the days surrounding
  • The Derivative Payoff Bias [Quantitativo]

    You're nothing but a pack of cards! Alice, standing up to the Queen of Hearts. I used to think Alice in Wonderland was just a goofy kids story. After re-reading it as an adult, I actually think its brilliant. Its satire dressed up as nonsense. A dream disguised as a joke. A mirror hiding in plain sight. The White Rabbit? Thats obsession and urgency. The Queen of Hearts?
  • Mastering the Tri-Timeframe Trend-Following System [Alina Khay]

    Most losing trades happen for one reason: traders fight the trend on the wrong timeframe. You see a beautiful setup on the 15-minute chart, but the daily is turning, and the 4-hour is in no man's land. The result? You get chopped, faked out, or stopped at the exact top. Thats where Tri-Timeframe Trend-Following comes in. This strategy aligns three layers of market structure macro,
  • Can We Profit from Disagreements Between Machine Learning and Trend-Following Models? [Quantpedia]

    When using machine learning to forecast global equity returns, its tempting to focus on the raw predictionwhether some stock market is expected to go up or down. But our research shows that the real value lies elsewhere. What matters most isnt the level or direction of the machine learning models forecast but how much it differs from a simple, price-based benchmarksuch as a naive
  • A Cheat Code for Crypto? [Robot Wealth]

    The best trading edges are often found in places most people dont think to look. Its why being a bit of a pirate zigging when others zag and finding opportunities in the markets blind spots is such an effective approach. Today, I want to share something that has me genuinely excited. Its a little like finding a cheat code in a video game that gives you special powers the other
  • Insider Trading Increases Market Efficiency [Alpha Architect]

    The empirical research (for example, here, here, here and here) on insider trading demonstrates that insider transactions have significant predictive power for future stock returns as they reveal helpful information that may affect the price of stocks. George Jiang and Yun Ma contribute to the literature with their November 2023 study, Does Insider Trading Correct Mispricing? which examined
  • Predicting Corrections and Economic Slowdowns [Relative Value Arbitrage]

    Being able to anticipate a market correction or an economic recession is important for managing risk and positioning your portfolio ahead of major shifts. In this post, we feature two articles: one that analyzes indicators signaling a potential market correction, and another that examines recession forecasting models based on macroeconomic data. Predicting Recessions Using The Volatility Index And

Recent Quant Links from Quantocracy as of 06/25/2025

This is a summary of links recently featured on Quantocracy as of Wednesday, 06/25/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Navigating Economic Downturns with Survey-Based Recession Indicators [Allocate Smartly]

    This test was inspired by Yulong Suns paper Navigating Economic Downturns: Insights from Survey-Based Recession Indicators. Strategy results from 1970 follow. Results are net of transaction costs see backtest assumptions. Learn about what we do and follow 90+ asset allocation strategies like this one in near real-time. Logarithmically-scaled. Click for linearly-scaled results. These results
  • I Tuned the Radio on My Stock Returns [Paper to Profit]

    Its dated technology. The radio. But underpinning its humble origins is an electrical engineering field known as signal processing that has applications in literally everything around us: WiFi routers, making music sound better, and even detecting earthquakes. While many readers may assume that I built my system with bespoke approaches tuned specifically for financial applications, the reality
  • Weekly Research Recap [Quant Seeker]

    Genetic Mimicking Portfolios for ETF Arbitrage (Crego, Kvaerner, Sommervoll, Sommervoll, and Stevens) Many ETFs trade at a premium or discount to their net asset value (NAV). This paper targets corporate bond ETFs trading at a premium by shorting them and hedging the position with a portfolio of other liquid ETFs that replicate the NAV. Even after accounting for trading costs, the strategy

Recent Quant Links from Quantocracy as of 06/24/2025

This is a summary of links recently featured on Quantocracy as of Tuesday, 06/24/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Model: Advances in clustering [Trading the Breaking]

    Look, heres the thingweve all been drinking the correlation Kool-Aid for decades, right? Its elegant, sure. Clean math. Easy to explain to the PMs. But lets get real: relying on a correlation matrix in todays markets is like trying to sail a speedboat with an anchor chained to your hull. Its not just simplisticits dangerously misaligned with how the game actually works.
  • Experimental Control for Machine Learning of Temporal Effects in Quantitative Trading [Hanguk Quant]

    Experimental control is one of the foundational principles of sound scientific experimentation. Its importance lies in ensuring that the conclusions drawn from an experiment are valid and attributable to the factor(s) being investigated, rather than to confounding variables. Experimental control allows researchers to manipulate only the independent variable(s), establishing causal relationships by
  • Comprehensive Comparison of Algorithmic Trading Platforms [Jonathan Kinlay]

    This comprehensive analysis examines three leading algorithmic trading platformsBuild Alpha, Composer, and StrategyQuant Xacross five critical dimensions: comparative reviews and rankings, asset class applicability, ensemble strategy capabilities, walk-forward testing and robust optimization, and strategy implementation with broker connectivity. Through extensive research of platform
  • Rethinking Leveraged ETFs and Their Options [Relative Value Arbitrage]

    A leveraged Exchanged Traded Fund (LETF) is a financial instrument designed to deliver a multiple of the daily return of an underlying index. Despite criticism, LETFs are frequently used by institutional investors. In this post, I discuss the practicality of LETFs and show that they are not as risky as they may seem. Information Content of Leveraged ETFs Options Leveraged ETFs, or exchange-traded

Recent Quant Links from Quantocracy as of 06/22/2025

This is a summary of links recently featured on Quantocracy as of Sunday, 06/22/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Science and Practice of Trend-following Systems: paper and presentation [Artur Sepp]

    I would like to introduce the updated draft of my paper co-authored with Vladimir Lucic and entitled The Science and Practice of Trend-following Systems. Trend-following systems have been employed by many quantitative and discretionary funds, also known as commodity trading advisors (CTAs), or managed futures, since the early 1980s. Richard Dennis, a commodity trader on the CME, organised
  • Ask Me Anything with Euan Sinclair [Robot Wealth]

    In this Ask Me Anything, Euan addressed the following questions: Key lessons from wacky genius Victor Niederhoffer Euans journey from market maker to sports bettor to options trader What are the most important predictors for options trades? Where can we find good long vol trades? What is the minimum viable tech stack for an options beginner? Is it reasonable to harvest a VRP with ETPs vs
  • The Surefire Ratio: My Custom Risk Ratio that Supercharged My Investing [Paper to Profit]

    Weve all used it. Its seen as the gold standard of investment metrics. But the Sharpe ratio is a dated formula that takes a naive assumption on the market and runs us into walls. It has no concept of prolonged drawdowns or causality, and those that continue to use it as the gospel are quantitative luddites handicapping their own success. But get this: With a simple financial ratio, we

Recent Quant Links from Quantocracy as of 06/19/2025

This is a summary of links recently featured on Quantocracy as of Thursday, 06/19/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Model: Clustering [Trading the Breaking]

    Alright, lets establish first principles. Before deploying capital into algorithmic strategies, one must confront the paradigm shift that distinguishes durable firms from those erased by structural blind spots: financial markets are not monolithic stochastic processes but non-stationary systems governed by latent regime dynamics. This is not heuristic philosophyits an empirical reality
  • I Used a Thermostat s Logic to Control My Portfolio And Achieved 24% CAGR [Paper to Profit]

    As traders, we scour the internet, books, and articles for industry specific information to create our new fancy algorithms. The Black-Scholes model, Markowitz Mean-Variance portfolio optimization, the Capital Asset Pricing Model (CAPM) These are all systems designed for investment purposes solely. derivatives – Proof Black Scholes Theta – Quantitative Finance Stack Exchange Enough of this math
  • Deep Reinforcement Learning for Portfolio Optimization [Gatambook]

    We wrote a lot about transformers in the last three blog posts. Their sole purpose was for feature transformation / importance weighting. These transformed and attention-weighted features will be used as input to downstream applications. In this blog post, we will discuss one such application: portfolio optimization via deep reinforcement learning. We will based our example on a paper by Sood et.
  • Weekly Research Recap [Quant Seeker]

    Decoding the Bond Market (Haghani and White) Investors often look to bonds for clues about future interest rates and inflation. This paper explains how to extract such signals from current market yields. After adjusting for convexity and risk premia, the authors find that markets expect long-term real rates to be near 1.75% and inflation to be around 2.1%. Given the low compensation for risk,
  • Why Most Markets and Styles Have Been Lagging US Equities? [Quantpedia]

    Over the past decade and a half, the US equities have set the hard-to-beat performance benchmark. Nearly all of the other countries, no matter if small or big, emerging or developed, have lagged behind. However, what are the forces behind this outperformance? Why did most of the other markets and even investing styles bow to the US large-cap growth dominance? A new paper written by David Blitz
  • Using Skewness and Kurtosis to Enhance Trading and Risk Management [Relative Value Arbitrage]

    Skewness is a measure of the asymmetry of a return distribution. In this post, Ill discuss the skewness risk premium and how skewness can be used to forecast realized volatility. Skewness Risk Premium in the Options Market Skewness of returns is a statistical measure that captures the asymmetry of the distribution of an assets returns over a specified period. It is particularly important in

Recent Quant Links from Quantocracy as of 06/14/2025

This is a summary of links recently featured on Quantocracy as of Saturday, 06/14/2025. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Absolute Valuation Models for the Stock Market: Are Indexes Fairly Priced? [Quantpedia]

    Valuation models for equity indexes are essential tools for investors seeking to assess long-term market conditions. Traditional models like the CAPE ratio, introduced by Robert J. Shiller, or the Buffett Indicator often rely on macroeconomic variables such as corporate earnings or GDP. While informative, these models can be complex and dependent on data that may be revised or vary across regions.
  • Cesar Alvarez – A Novel Way to Combine Trend, Reversion, ETFs, Volatility & More [Algorithmic Advantage]

    When I sat down recently with Cesar Alvarez of Alvarez Quant Trading, I knew I'd be tapping into a deep reservoir of quantitative trading wisdom. Cesars journey into systematic trading began similarly to many of usstarting with discretionary trades, dabbling in mutual funds, and eventually stumbling into the quant world. From his early days at Connors Research to managing sophisticated
  • Generating Synthetic Equity Data with Realistic Correlation Structure [Quant Start]

    Recently on QuantStart we have begun looking at generating synthetic asset price paths using Stochastic Differential Equation models such as the Brownian Motion, Geometric Brownian Motion (GBM), Ornstein-Uhlenbeck and Vasicek Models. Historically, we have also considered more sophisticated models such as the Heston Stochastic Volatility Model. What we have not considered to any great extent in
  • Don’t Over-Engineer your Trading Business Make Money Instead [Robot Wealth]

    Someone sent me their trading technology blueprint. It was a thing of beauty: timeseries databases, Grafana dashboards, message queues, and all sorts of fancy architecture. My first question: What are you currently trading? Their answer: Nothing yet. But Im planning a medium frequency stat arb basket trade. I almost spat out my coffee. Look, I get it. If you come from a tech
  • Enhancing Momentum Strategies [Alpha Architect]

    Paul Calluzzo, Fabio Moneta, and Selim Topaloglu, authors of the April 2025 study Momentum at Long Holding Periods investigated a key aspect of how academic momentum strategies are typically constructed when forming a portfolio. Specifically, at the end of each month t1, the standard 12-2 momentum strategy sorts stocks based on their cumulative returns from month t12 to month t2 and
  • Research Review | 13 June 2025 | Analyzing And Monitoring Risk [Capital Spectator]

  • Short-Term Basis Reversal [Quantitativo]

    A single hair from the head of a woman is worth more than all the books of Galen and Avicenna. Paracelsus. Paracelsus (14931541) was one of the most radical and influential physicians and philosophers of the Renaissance. A restless traveler, alchemist, and fierce critic of medical orthodoxy, he believed that true knowledge came not from ancient books but from direct observation of nature
  • Weekly Research Recap [Quant Seeker]

    The Reaction of Corn Futures Markets to US and Brazilian Crop Reports (Silveira, Silva, Mattos, Junior, and Capitani) Crop reports from the US and Brazil inform markets about expected corn production, but not all reports have the same impact. The authors find that US reports prompt sharp price movements and trading spikes in both US and Brazilian futures markets while Brazilian reports, on the