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Quantocracy’s Daily Wrap for 01/11/2019

This is a summary of links featured on Quantocracy on Friday, 01/11/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 01/09/2019

This is a summary of links featured on Quantocracy on Wednesday, 01/09/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • How Bad Was 2018 s Volatility? [Alvarez Quant Trading]

    I have a Google Home in my bathroom that I play a morning routine while I shave, brush my teeth and get ready for the day. One step is to play The Indicator podcast from Planet Money. This morning they were talking about how 2018 was one of the most volatile years on record for the stock market. Of course that caught my attention and I wanted to discover how they measured that. The
  • Omega ratio, the ultimate risk-reward ratio? [Quant Dare]

    If you are working in finance, you have almost surely heard of risk-reward ratios and probably used some of them to evaluate the performance of a stock, ETF, or any other investment strategy. Among the different alternatives, the most popular risk-reward ratio is the so-called Sharpe ratio, first introduced by William F. Sharpe in 1966. It was originally termed reward-to-variability ratio and,

Quantocracy’s Daily Wrap for 01/08/2019

This is a summary of links featured on Quantocracy on Tuesday, 01/08/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Payday Anomaly Revisited [Alpha Architect]

    Unless you are a die-hard buy-and-hold investor, chances are that you need to rebalance your portfolio at some point. The question is when? And how often? And why at a specific time? Some strategies rebalance once a year, some multiple times a day. What if there were better times to rebalance? Last thing you want is to rebalance on a highly volatile day like August 31, 1998 and deal with a -6.5%
  • Ranking The Current US Stock Market Drawdown vs. History [Capital Spectator]

    Its anyones guess if the recent rebound in US equities will soon push the S&P 500 Index to a new high. What we do know is that the market has staged a solid bounce so far. For the eight trading days since Christmas Eves close, when the S&Ps current drawdown hit bottom, the index is up a solid 8.4%. Theres still a long climb ahead to recover the remaining ground lost since
  • Rare Zweig Breadth Thrust Signal Suggests Bullish Implications [Quantifiable Edges]

    The strong breadth we have seen recently has caused the 10-day exponential moving average of the NYSE Up Issues % to rise up to 62%. A move through 61.5% after being below 40% within the last 2 weeks is considered a Zweig Breadth Thrust trigger. This is a signal created by Martin Zweig. Over the long haul it has been a rare but powerful signal. Below is a list of all signals since 1970 along with
  • Video Digest: Process & Manager Diversification [Flirting with Models]

  • Herding and Mutual Fund Performance [Alpha Architect]

    What are the Research Questions? Can investors identify skilled and unskilled mutual fund managers by observing their tendency to herd? Do differences in herding behavior across funds predict mutual fund performance? Does skill drives the link between herding and future performance? Does herding reduce the probability that inexperienced managers are terminated? What are the Academic Insights? By

Quantocracy’s Daily Wrap for 01/07/2019

This is a summary of links featured on Quantocracy on Monday, 01/07/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • You Would Have Missed 961% In Gains Using The CAPE Ratio, And That s A Good Thing [Meb Faber]

    961%. Thats the amount of gains you would have missed had you followed the market timing strategy Im going to describe in the following article that utilizes the CAPE ratio. Yes, thats significant. But theres far more to this story, and I suspect that had you acted on this strategy, youd have actually been quite happy to miss out on those gains. Lets start by rewinding a few
  • An Anatomy of Smart Beta Value ETFs [Factor Research]

    Smart beta Value ETFs are relatively homogenous Some show high exposures to other equity factors, which may represent risk Excess returns from smart beta are significantly lower than long-short factor returns INTRODUCTION The last ten years can be viewed as a lost decade for Value investors as excess returns were almost consistently negative. Although ETF investors have allocated more capital to
  • Is Multi-Manager Diversification Worth It? [Flirting with Models]

    Portfolio risk is traditionally quantified by volatility. The benefits of diversification are measured in how portfolio volatility is changed with the addition or subtraction of different investments. Another measure of portfolio risk is the dispersion in terminal wealth: a measure that attempts to capture the potential difference in realized returns. For example, two equity managers that each
  • The fundamental value trap [SR SV]

    Fundamental value seems like a straightforward investment approach. One simply looks for assets that are cheap or expensive relative to their rationally expected risk-adjusted discounted cash flows. In reality, conscientious estimation of fundamental value gaps is one of the most challenging strategies in asset management. It requires advanced financial modeling and often long waiting
  • 2018 Volatility Recap [Quintuitive]

    2018 brought more volatility to the markets, which so far has spilled into 2019. Lets take a look at the long term volatility history picture using the Dow Jones Industrial Average: Indeed, 2018 was the most volatile year since 2011. Relatively speaking however, the volatility is on the low end for a bear market, which I believe started in late December. The above chart was produced using the

Quantocracy’s Daily Wrap for 01/05/2019

This is a summary of links featured on Quantocracy on Saturday, 01/05/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Reproducible Finance with R – Book Review [Eran Raviv]

    Reproducible Finance with R is a clever book, with modern treatment of classical concepts. Here below is what I liked- and disliked about the book. Back when I was practicing Judo, there was a guy in my group who mastered that one exercise (called Uchi Mata). He could go fighting 20 consecutive fights without losing once, flooring all his opponents by doing what he did best. Thats how I think
  • New Year s Quant resolutions [Cuemacro]

    So this is Christmas / And what have you done? / Another year over / And a new one just begun, as John Lennon once sung. Whilst Christmas is a time to reflect on the past year, the New Year is instead a time to look forward. This may involve New Years resolutions, or possibly not. On the personal side, Ive tried to come up with some New Years resolutions and inevitably they resolve around

Quantocracy’s Daily Wrap for 01/04/2019

This is a summary of links featured on Quantocracy on Friday, 01/04/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Reminder: Big Up Days Occur With More Frequency in Bear Markets [Allocate Smartly]

    We cant say with certainty where the market goes from here whether the market will turn around in January or continue into bear territory and neither can anyone else. What we can say for certain however is that big up days like we saw today (SPY +3.35%) are not an indicator that this market is out of the woods. Contrary to conventional wisdom, big up days occur with more frequency in
  • A Simple Analysis of 2018 U.S. Factor Returns [Alpha Architect]

    As the year turns, a common practice is to assess a portfolio and see how each position performed. The summary for stocks is easy: equities did not do well. Whether you were invested in U.S. stocks (down ~5%+), developed markets (down ~13%+), or emerging markets (down ~20%+), being invested in equities left few investors with positive returns. In short, 2018 was a rough year for investors. Even

Quantocracy’s Daily Wrap for 01/03/2019

This is a summary of links featured on Quantocracy on Thursday, 01/03/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • After A New Year Starts On A Good Note [Quantifiable Edges]

    Last nights subscriber letter featured (an expanded version of) the following study, which looks at performance in the 1st couple of days following a positive 1st day of a new year. 2019-01-03 The stats and curve all suggest some immediate follow-through has been typical. There have now been 10 winners in a row, with the last loser occurring in 1998. Also notable is that 26 of the 28 instances

Quantocracy’s Daily Wrap for 01/02/2019

This is a summary of links featured on Quantocracy on Wednesday, 01/02/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Tactical Asset Allocation in December [Allocate Smartly]

    This is a summary of the recent performance of a wide range of excellent tactical asset allocation 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 you
  • The Best Global Stock Markets for Short Sellers [Quant Rocket]

    If you're a short seller exploring global markets, a good first question to ask is: are there shares available to borrow? This post looks at the percentage of stocks that are shortable through Interactive Brokers in each of 17 countries. Data source Interactive Brokers provides an FTP site with a list of all shortable stocks and the number of shortable shares available for each, organized by

Quantocracy’s Daily Wrap for 01/01/2019

This is a summary of links featured on Quantocracy on Tuesday, 01/01/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • How bad is the problem of data misuse in finance research papers? [Mathematical Investor]

    Spurious results are the norm Having done a healthy share of paper replications over the past decade, and having been consistently disappointed when the models or techniques broke down on data shortly after (or even before) the authors sample periods, I would say that data misuse is a gigantic problem spurious results are the norm. But also over those years, the granularity of market data
  • Is Asset Dynamics Priced In Correctly by Black-Scholes-Merton Model? [Relative Value Arbitrage]

    A lot of research has been devoted to answering the question: do options price in the volatility risks correctly? The most noteworthy phenomenon (or bias) is called the volatility risk premium, i.e. options implied volatilities tend to overestimate future realized volatilities. Much less attention is paid, however, to the underlying asset dynamics, i.e. to answering the question: do options price
  • Factor Olympics 2018 [Factor Research]

    2018 was negative for classic multi-factor portfolios Low Volatility generated the best and Value the worst performance Factor performance was homogenous across global markets INTRODUCTION We present the performance of five well-known factors on an annual basis for the last 10 years, including 2018. We only present factors where academic research highlights positive excess returns across market
  • Programming’s Achilles Heal [John Orford]

    I am building a small Domain Specific Language (spreadsheet style calculations) called FlatLang with some interesting properties. These are my notes. ~ FlatLang is a functional, pure, total, statically typed language. To simplify, 1) (almost) everything is a function 2) each function's 'functionality' is described completely by its inputs and outputs 3) each function will produce an
  • Our Most Popular Posts in 2018 [Dual Momentum]

    Happy New Year! In case you missed them, here were our most popular posts in 2018: Extended Backtest of Global Equity Momentum My book had dual momentum results from 1974 through 2013. With the acquisition of additional data, we are now able to show results back to 1950. We also explain why 1950 is a good starting date for looking at global investing. Perils of Data Mining We show examples of

Quantocracy’s Daily Wrap for 12/31/2018

This is a summary of links featured on Quantocracy on Monday, 12/31/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • 2018 Highlights The Top 20 Posts You Might Have Missed [Flirting with Models]

    As 2018 comes to a close, we are thankful for all those who have read, commented upon, and shared the research that we have published this year. This year, we wrote 53 new research commentaries, averaging north of 3,000 words per piece. And we hope our approach of accessible and thoughtful quantitative research has resonated as much as the numbers seem to indicate: viewership for our blog this
  • Exploring Smart Leverage: DAA on Steroids [TrendXplorer]

    The constant leverage myth is busted: there is no spoon natural decay. DAAs fast protective momentum approach successfully detects lower volatility regimes with higher streak potential. Smart leverage through a clever separation of signals and trades can achieve considerable outperformance even on a risk adjusted basis. Popular belief that constant leveraging results in decay over time is a