This is a summary of links featured on Quantocracy on Monday, 09/16/2019. To see our most recent links, visit the Quant Mashup. Read on readers!
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No, the VIX is Not Broken [Six Figure Investing]Hardly a month goes by without some pundit trumpeting that the VIX is broken. But before you worry too much, consider some of the non-obvious characteristics of the Cboes Fear Gauge. First a Summary These charts list possible explanations for perceived VIX brokenness Complaint Market in Low Volatility State (21-day std dev close-to-close log returns VIX too high * VIX has an overhead
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The Failure of Value Investing explained [Alpha Architect]Its no secret that value has had a bad bout of performance in recent memory. This underperformance has been thoroughly examined by multiple research teams and weve done some of our own work on the subject. Weve also done in-depth rebuttals to value investing is dead articles in the past (Alternative Facts about Formulaic Value Investing, The Re-Death of Value, or Dj Vu All
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Factors and the Glide Path [Flirting with Models]Value and momentum equities exhibited significant performance last week raising short-term questions about factor crowding and long-term questions about appropriate factor diversification. We explore the idea of appropriate factor diversification through the lens of a retiring investor, asking the question, are all equity styles appropriate at all points in an investors lifecycle? Using a
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Risk Parity Part II: The Long-Run View [Two Centuries Investments]In Part I Risk Parity, I discussed theChasing Diversifiers problem that harms investors performance. This week, I apply the Relevance of the Long-Run concept to Risk Parity. First, let me acknowledge upfront that deep historical data is messy and is not precise. Depending on the source, you might get different results. Having said that, I still prefer to supplement my analysis with
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Will investors outlive their savings? [Mathematical Investor]As we explained in an earlier Mathematical Investor blog, target-date funds are currently the rage in the finance world. The term refers to a mutual fund that targets a given retirement date, and then steadily shifts the allocation of assets from, say, a 80%/20% mix of stocks and bonds at the start to, say, a 30%/70% or 20%/80% mix as the target date approaches. Vanguard Group, which manages
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Is Low Vol the New Value? [Factor Research]The Low Volatility factor exhibited significant exposure to Value since 1989 The factors were highly correlated in the 1990s, but less after the financial crisis Quantitative easing was positive for Low Volatility, but negative for Value INTRODUCTION Riding the Ferris wheel in an amusement park is the equivalent of investing in a Low Volatility strategy in the stock market. It is all about
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Reinforcement learning and its potential for trading systems [SR SV]In general, machine learning is a form of artificial intelligence that allows computers to improve the performance of a task through data, without being directly programmed. Reinforcing learning is a specialized application of (deep) machine learning that interacts with the environment and seeks to improve on the way it performs a task so as to maximize its reward. The computer employs trial and
