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Quantocracy’s Daily Wrap for 06/03/2018

This is a summary of links featured on Quantocracy on Sunday, 06/03/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Sharpe Ratio > 1 : Careful What You Wish For [Quantum Financier]

    I had the pleasure to hang out with the good folks over at Resolve Asset Management recently. Part of our discussion centered around the differences between our two worlds. As you can imagine, prop trading is fairly different from institutional asset management. A topic of particular interest to both of us however was how to manage expectations. On their end one can imagine that in order to be
  • Cleaning data for trading [Cuemacro]

    Nobody likes doing the boring stuff. We all want to go on holiday, but packing our bags is not the fun bit. We all want to have a nice burger (well, I do), but queuing for ages at an ever popular burger joint is not what we want. Traders all want to have positive P&L, but well negative P&L happens, sometimes. When it comes to data science, in whichever industry, cleaning data is going to
  • Shapley Value Allocation of Operational Risk Capital Charges using Airport Problem Solution [Quant At Risk]

    In Financial Risk Management the most challenging part for quantitative modeling is, beyond any doubt, the Operational Risk (Ops Risk). It is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, but excludes strategic and reputation risk. According to Basel Committee, (not only American)

Quantocracy’s Daily Wrap for 06/02/2018

This is a summary of links featured on Quantocracy on Saturday, 06/02/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • A simple rule for exchange rate trends [SR SV]

    Over the past decades developed market exchange rates have displayed two important regularities. First, real exchange rates (nominal exchange rates adjusted for domestic price trends) have been mean reverting. Second, the mean reversion has predominantly come in form of nominal exchange rate trends. Hence, a simple rule of thumb for exchange rate trends can be based on the expected re-alignment

Quantocracy’s Daily Wrap for 06/01/2018

This is a summary of links featured on Quantocracy on Friday, 06/01/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Factor Regressions Problems and How to Fix Them [Alpha Architect]

    Factor Regressions are one way to ascertain a funds exposure to certain factors that an investor/advisor may want to allocate towards, such as Value, Momentum, Quality, etc. Luckily, there are some great free tools available online, such as portfoliovisualizer.com, that allows investors to run the regressions for most mutual funds and ETFs. For those interested in diving into the weeds of

Quantocracy’s Daily Wrap for 05/31/2018

This is a summary of links featured on Quantocracy on Thursday, 05/31/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Big Data and Machine Learning Revolution: Event takeaways, slides & videos [Raven Pack]

    More than 600 finance professionals registered to attend the London Revolution. An excellent group of top finance professionals shared their latest research and experience with big data and machine learning. The event took place on April 24, 2018 at the Banking Hall, one of the most exquisite venues in Central London. In case you weren't able to attend, presentation slides and video
  • Sharpening the Arithmetic of Active Management [Alpha Architect]

    For many investors, the superiority of passive investing over active investing is axiomatic (Earth to passive investors; Lunch is never free!) And why not? Study after study has demonstrated that only a small portion of actively managed funds beat their benchmarks over long time frames. A recent Wall Street Street Journal article, The Dying Business of Picking Stocks, noted that while 66% of
  • Style Investing in Fixed Income [Alpha Architect]

    The paper investigates this issue by answering the following research questions: Can common robust risk premia (value, momentum, carry and defensive) enhance returns in Fixed Income investing? Do style-based Fixed Income portfolios present diversifying potential? Is a long/short implementation necessary to reap these benefits? What are the Academic Insights? By applying style premiums to country

Quantocracy’s Daily Wrap for 05/29/2018

This is a summary of links featured on Quantocracy on Tuesday, 05/29/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Dollar-Cost Averaging: Improved by Trend? [Flirting with Models]

    The choice to lump sum invest (LSI) or dollar-cost average (DCA) is one fraught with emotion. Intuition tells us that LSI likely offers the best bet for long-term investors as markets, in general, tend to go up. However, can signals derived from simple trend models offer an edge? We find that over longer-term periods (e.g. 6- and 12-months), LSI largely dominates DCA.However, in the
  • How Seasonality The Week Of Memorial Day Has Changed Over The Years [Quantifiable Edges]

    Happy Memorial Day! The week of Memorial Day has shown some interesting seasonal tendencies over the years. But it has faltered greatly the last few. The chart below is one I have shown in the past, and have now updated. It examines SPX performance from the Friday before Memorial Day to the Friday after it. 2018-05-28 There was no substantial edge apparent throughout the 70s, but starting in 1983
  • Short-Term Return Reversals and Intraday Transactions [Quantpedia]

    I examine whether a short-term reversal is attributed to past intraday or overnight price movements. The results show that intraday returns significantly reverse in the following week, while overnight returns do not, indicating that the short-term reversal is attributed to past intraday price movements. In addition, the reversal of intraday returns is stronger for more illiquid stocks and during

Quantocracy’s Daily Wrap for 05/28/2018

This is a summary of links featured on Quantocracy on Monday, 05/28/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Tactical Mean-Reversion [Factor Research]

    The Mean-Reversion factor is driven by volatility Allocating tactically when volatility is high generates an attractive payoff profile The strategy can be considered as a tail risk hedge for equity portfolios INTRODUCTION Our most recent research note focused on the Mean-Reversion factor (please see the report Mean-Reversion Across Markets), which highlighted performance and strategy
  • An Improved Currency Strength Indicator plus Gold and Silver Indices? [Dekalog Blog]

    In the past I have blogged about creating a currency strength indicator ( e.g. here, here and here ) and this post talks about a new twist on this idea. The motivation for this came about from looking at chart plots such as this, which shows Gold prices in the first row, Silver in the second and a selection of forex cross rates in the third and final row. The charts are on a daily time scale and
  • Building A Better Trend Filter [System Trader Success]

    In this article I will create a trend filter (also known as market mode filter or regime filter) that is adaptable to volatility and utilizes some of the basic principles of hysteresis to reduce false signals (whipsaws). As you may know, I often will use the 200-period simple moving average (200-SMA) to determine when a market is within a bull or bear mode on a daily chart. When price closes above

Quantocracy’s Daily Wrap for 05/26/2018

This is a summary of links featured on Quantocracy on Saturday, 05/26/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Investor Attention and the Low Volatility Anomaly [Alpha Architect]

    One of the big problems for the first formal asset pricing model developed by financial economists, the Capital Asset Pricing Model (CAPM), was that it predicts a positive relationship between risk and return. However, the historical evidence demonstrates that while the slope of the security market line is generally positive (higher-beta stocks provide higher returns than low-beta stocks), it is
  • Research Review | 25 May 2018 | Business Cycle Risk [Capital Spectator]

    Is Fertility a Leading Economic Indicator? Kasey Buckles (University of Notre Dame), at al. March 28, 2018 Many papers show that aggregate fertility is pro-cyclical over the business cycle. In this paper we do something else: using data on more than 100 million births and focusing on within-year changes in fertility, we show that for recent recessions in the United States, the growth rate for

Quantocracy’s Daily Wrap for 05/24/2018

This is a summary of links featured on Quantocracy on Thursday, 05/24/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Trading the Equity Curve More Ideas [Alvarez Quant Trading]

    A couple posts ago, I looked at Trading the Equity Curve and found interesting results but nothing that made me decide this works for me. Using the equity curve to decide when to stop trading a strategy just sounds like it should work. But for me it is always about testing. I cannot count how often I thought an idea would help the results only to see them dramatically hurt them. Remember test
  • Using Quadratic Discriminant Analysis To Optimize An Intraday Momentum Strategy [Quant Insti]

    In this post, we will create an intraday momentum strategy and use QDA as a means of optimizing our strategy. Well begin by reviewing Linear Discriminant Analysis or LDA and how it is associated with QDA, gain an understanding of QDA and when we might implement this technique instead of Linear Discriminant Analysis. We will then create our intraday momentum strategy using data on the eMini

Quantocracy’s Daily Wrap for 05/23/2018

This is a summary of links featured on Quantocracy on Wednesday, 05/23/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Dimensions of Return [Factor Investor]

    There are three universal dimensions of return that drive the performance of all strategiesregardless of investment style or asset class: consistency, magnitude, and conviction. These dimensions serve as levers that can increase or decrease performance of any strategy. They also provide context for why portfolios are constructed in the manner that they are. This piece will attempt to create a
  • What to do with Underperforming Investments? Assessment via Bayesian Inference [Alpha Architect]

    Assume you made a decision to invest in an active strategy based on, say, a backtest of the underlying process (to be clear, active means NOT passive market-cap weight in my context). Over the next few years, you sit in the strategy watching it underperform the passive benchmark. You are a disciplined investor, so you dont want to dump something based on recent performance, but you also dont
  • Interesting Insights into Trend-Following Strategies [Quantpedia]

    Because of the adaptive nature of position sizing, trend-following strategies can generate the positive skewness of their returns, when infrequent large gains compensate overall for frequent small losses. Further, trend-followers can produce the positive convexity of their returns with respect to stock market indices, when large gains are realized during either very bearish or very bullish
  • Biclustering time series [Quant Dare]

    In this post, well take a brief look at biclustering algorithms. They reveal easily interpretable patterns in our data and give us more information about the links between observations and features than simpler clustering algorithms usually do. Weve already reviewed a number of non-supervised clustering algorithms that group subsets of observations that are similar to each other and differ

Quantocracy’s Daily Wrap for 05/21/2018

This is a summary of links featured on Quantocracy on Monday, 05/21/2018. To see our most recent links, visit the Quant Mashup. Read on readers!

  • QuantMinds Lisbon 2018 [Cuemacro]

    Lisbon sits wedged between the Atlantic on the West and the river Tagus on the south. Its buildings seemingly tanned to deep pastel shades, reflect a sun, which seems forever present. Whilst is it the history of the city, which appears to greet the visitor at first, whether it the Tower of Belem, or monastery, in recent years Lisbon has embraced change. Fancy buildings such as the MAAT (Museum
  • Technical Analysis in the Chinese Stock Market: Does it Work? [Alpha Architect]

    The authors conduct a comprehensive analysis of five categories of technical trading rules (including channel break rules, filter rules, moving average rules, oscillator rules and support/resistance rules) using aggregate data from the Chinese stock market for the period 1997 to 2015. Do technical trading rules work in the Chinese stock market after mitigating the impact of data mining
  • Separating Ingredients and Recipe in Factor Investing [Flirting with Models]

    Portfolio construction is a lot like cooking. There are two equally important elements: the ingredients and the recipe. The ingredients are the signals that are used to select investments. The recipe is the set of rules used to transform those signals into portfolio allocations. In factor investing, the signals (e.g., value, momentum, carry) often get all the attention and the importance of the
  • Mean-Reversion Across Markets [Factor Research]

    Volatility spiked in the first quarter of 2018 when global stock markets declined, which was mainly due to concerns on proposed tariffs by the US government and rising interest rates. Since then markets recovered and volatility declined again, but higher interest rates are likely to have a negative impact on the global economy given record levels of public, corporate and consumer debt. Higher
  • Commodity pricing [SR SV]

    A new paper combines two key aspects of commodity pricing: [1] a rational pricing model based on the present value of future convenience yields of physical commodity holdings, and [2] the activity of financial investors in form of rational short-term trading and contrarian trading. Since convenience yields are related to the scarcity of a commodity and the value of inventories for production and