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Quantocracy’s Daily Wrap for 03/11/2019

This is a summary of links featured on Quantocracy on Monday, 03/11/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Monsters of Investing: Fast and Slow Failure [Flirting with Models]

    Successful investing requires that investors navigate around a large number of risks throughout their lifecycle. We believe that the two most daunting risks investors face are the risk of failing fast and the risk of failing slow. Slow failure occurs when an investor does not grow their investment capital sufficiently over time to meet future real liabilities. This often occurs because they fail
  • The Largest Cost Facing Investors Today [Two Centuries Investments]

    Alternative Title: The Gap Everywhere There exist many flavors of market timing. Some are obvious: In 1929, an influential businessman states that US Equities will return 24% per year for the next 20 years; or in 1999, a stock market forecaster predicts Dow Jones to double On dollar-weighted basis, equity mutual fund investors under-perform buy-and-hold by 6.2% per year during the past 30 years.

Quantocracy’s Daily Wrap for 03/08/2019

This is a summary of links featured on Quantocracy on Friday, 03/08/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Synthetic Data Generation (Part-1) – Block Bootstrapping [Black Arbs]

    Data is at the core of quantitative research. The problem is history only has one path. Thus we are limited in our studies by the single historical path that a particular asset has taken. In order to gather more data, more asset data is collected and at higher and higher resolutions, however the main problem still exists; one historical path for each asset. Derivatives pricing has come up with
  • Options Expiration Week Performance By Month 2019 Update [Quantifiable Edges]

    Next week is monthly options expiration week. Ive noted several times over the years that Op-ex week in general is pretty bullish. March, April, October, and December it has been especially so. S&P 500 options began trading in mid-1983. The table below is one I have showed in March each of the last several years. It goes back to 1984 and shows op-ex week performance broken down by month.

Quantocracy’s Daily Wrap for 03/07/2019

This is a summary of links featured on Quantocracy on Thursday, 03/07/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Sector Business Cycle Analysis [Alpha Architect]

    There are different investment approaches to identify sector winners and losers, such as price momentum strategies, top down approach based on specific macroeconomic indicators or bottom-up approaches to identify sectors with improving fundamentals. One widely used approach is business cycle analysis. Since economic cycles usually exhibit characteristics that impact sectors or industries

Quantocracy’s Daily Wrap for 03/05/2019

This is a summary of links featured on Quantocracy on Tuesday, 03/05/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Intraday Momentum with Leveraged ETFs [Quant Rocket]

    Does forced buying and selling of underlying shares by leveraged ETF sponsors cause predictable intraday price moves? This post explores an intraday momentum strategy based on the premise that it does. Daily rebalancing of leveraged ETFs Source: Ernie Chan, Algorithmic Trading: Winning Strategies and Their Rationale, Wiley, May 28, 2013, chapter 7. Per their fund objectives, leveraged ETFs must

Quantocracy’s Daily Wrap for 03/04/2019

This is a summary of links featured on Quantocracy on Monday, 03/04/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Tiingo.com – My Go-To Database For Historical Market Prices [Capital Spectator]

    In the spring of 2017, Yahoo pulled a fast one on the crowd by suddenly changing the technical coding rules for accessing its financial data, leaving countless R users high and dry, including yours truly. Numerous R files that had been meticulously written, revised and maintained over months and years were suddenly broken. Not fun. As frustrating as that day was (not to mention the weeks that
  • Day of the Week Matters for Some Anomalies [Alpha Architect]

    According to psychology literature, mood increases from Thursday to Friday and decreases on Monday. In general, people tend to evaluate future prospects more optimistically when they are in a good mood than when they are in a bad mood. In equity markets, the presence of optimism or pessimism that is unrelated to fundamentals, usually called sentiment, delivers clear, testable cross-sectional
  • The Quant Conference – April 12th in New York City – Learn About The Industry From Those Who Built It

    The rise of big data, application of machine learning and other technological developments in recent years have transformed the quantitative finance industry, and The Quant Conference has been conceived as a unique event to provide an educational forum for delegates to hear about current trends in the cutting-edge field of quantitative finance. The Quant Conferences speaker roster of industry
  • Value, Momentum and Basis in Commodity Futures: 1877-2017 [Two Centuries Investments]

    Commodity Futures contracts were established in 1865, but commercially available data starts in 1959, leaving an 80+ year period of unstudied history. In our latest academic paper Two Centuries of Commodity Futures Premia Chris Geczy and I use hand-collected futures data to extend the well-known cross-sectional Value, Momentum and Basis factors in commodity futures back to 1877. This paper
  • How Much Accuracy Is Enough? [Flirting with Models]

    It can be difficult to disentangle the difference between luck and skill by examining performance on its own. We simulate the returns of investors with different prediction accuracy levels and find that an investor with the skill of a fair coin (i.e. 50%) would likely under-perform a simple buy-and-hold investor, even before costs are considered. It is not until an investor exhibits accuracy in
  • Tactical Asset Allocation in February [Allocate Smartly]

    This is a summary of the recent performance of a wide range of excellent Tactical Asset Allocation (TAA) strategies, net of transaction costs. These strategies are sourced from books, academic papers, and other publications. While we dont (yet) include every published TAA model, these strategies are broadly representative of the TAA space. Learn more about what we do or let AllocateSmartly help
  • Benchmarking Smart Beta ETFs [Factor Research]

    Long-only factor portfolios can be used for benchmarking smart beta ETFs Results highlight minor tracking errors Likely explained by relatively homogenous factor definitions by ETF issuers INTRODUCTION Investment professionals are not known for their creativity, but that is perhaps only because people outside of the finance industry do not understand the intricacies of finance. Significant amounts

Quantocracy’s Daily Wrap for 03/02/2019

This is a summary of links featured on Quantocracy on Saturday, 03/02/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Open Source Hedge Fund Project from Jacques Joubert (@JacquesQuant) [Quants Portal]

    Dear Hedge Fund Enthusiasts, Its been long since we sent out a newsletter but we would like to report that the Open Source Hedge Fund Project is alive and kicking again! My Msc in Financial Engineering has provided me with the unique opportunity to build an open source python package, like pandas, for my final research project. I am hunting for a unique contribution to the literature in the
  • How salience theory explains the mispricing of risk [SR SV]

    Salience theory suggests that decision makers exaggerate the probability of extreme events if they are aware of their possibility. This gives rise to subjective probability distributions and undermines conventional rationality. In particular, salience theory explains skewness preference, i.e. the overpricing of assets with a positive skew and the under-pricing of contracts with a negative skew.

Quantocracy’s Daily Wrap for 02/28/2019

This is a summary of links featured on Quantocracy on Thursday, 02/28/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Skew and Trend Following [Investment Idiocy]

    In this post I discuss a well known stylised fact of the investment industry: "Trend following is a positively skewed strategy". Spoiler alert: yes it is (sort of), but it's much more complicated (and interesting!) than you might think. A quick primer on positive skew So what actually is positive skew? Essentially it's an asset, or trading strategy, whose returns have the

Quantocracy’s Daily Wrap for 02/27/2019

This is a summary of links featured on Quantocracy on Wednesday, 02/27/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • KDA – Robustness Results [QuantStrat TradeR]

    This post will display some robustness results for KDA asset allocation. Ultimately, the two canary instruments fare much better using the original filter weights in Defensive Asset Allocation than in other variants of the weights for the filter. While this isnt as worrying (the filter most likely was created that way and paired with those instruments by design), what *is* somewhat more
  • Rebalancing…Not so Fast [Alpha Architect]

    My last article used Warren Buffetts pre-crisis sale of put options to highlight the risk of getting over our financial skis. In both temperament and negotiation, Warren can outlast most bear markets. Many of us cannot. Proponents of rebalancing should acknowledge the real risk that downturns can continue, and that rebalancing increases the risk of crying uncle, giving into the pain and

Quantocracy’s Daily Wrap for 02/26/2019

This is a summary of links featured on Quantocracy on Tuesday, 02/26/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Ilya Kipnis’ Defensive Adaptive Asset Allocation [Allocate Smartly]

    This is a test of Ilya Kipnis Defensive Adaptive Asset Allocation (KDA). KDA is a Meta model of sorts, combining successful elements of multiple other tactical asset allocation strategies that we track. Results from 1989 to the present, net of transaction costs, follow. Read more about our backtests or let AllocateSmartly help you follow this strategy in near real-time.
  • The Extreme Persistence Of The Current SPX Rally [Quantifiable Edges]

    The last time the SPX closed below its 10-day moving average was January 3rd. That means it has now been 35 straight trading days that SPX has closed above the 10ma. That is a very long streak. Below is a list of all streaks since 1928 of 35 days or longer. (Note: prior to 1957 S&P 90 Index data is used. This is the predecessor to the S&P 500.) 2019-02-26 I have highlighted the

Quantocracy’s Daily Wrap for 02/25/2019

This is a summary of links featured on Quantocracy on Monday, 02/25/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Developing a Trading Strategy using Volume Data [Quant News]

    Traders and market analysts use volume data, which is the amount of buying and selling of an instrument over a given time period, to gauge the strength of an existing trend or identify a reversal. The back-and-forth movement between buyers and sellers for the best available price allows us to analyze volume to confirm trends and predict reversals. Generally, volume tends to increase as a trend
  • Low Volatility Can Be Low Turnover [Alpha Architect]

    Low volatility strategies have garnered a fair amount of popularity and a growing body of supporting research. Studies have shown risk reduction levels of 25%, while turnover has varied from 20% to 120%. However, higher turnover produces higher costs of trading, such that the excess return obtained with low volatility products may actually be subsumed by those same trading costs. The authors of
  • Three Applications of Trend Equity [Flirting with Models]

    Trend equity strategies seek to meaningfully participate with equity market growth while side-stepping significant and prolonged drawdowns. These strategies aim to achieve this goal by dynamically adjusting market exposure based upon trend-following signals. A nave example of such a strategy would be a portfolio that invests in U.S. equities when the prior 1-year return for U.S. equities is
  • Minimum Variance Versus Low Volatility [Factor Research]

    The largest smart beta Low Volatility ETF is technically a Minimum Variance strategy Low Volatility and Minimum Variance have comparable and attractive characteristics However, both currently feature a high sensitivity to interest rates INTRODUCTION The Low Volatility factor was the best performing factor in 2018, which few investors expected at the beginning of the year. Central banks across the