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Quantocracy’s Daily Wrap for 12/19/2023

This is a summary of links featured on Quantocracy on Tuesday, 12/19/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Beyond Modified Value-at-Risk: Application of Gaussian Mixtures to Value-at-Risk [Portfolio Optimizer]

    In a previous post, I described a parametric approach to computing Value-at-Risk (VaR) – called modified VaR12 – that adjusts Gaussian VaR for asymmetry and fat tails present in financial asset returns3 thanks to the usage of a CornishFisher expansion. Modified VaR, when properly used4, provides accurate estimates of the VaR for a wide range of non-normal portfolio return distributions.
  • Can Machine Learning help to select mutual funds with positive alpha? [Alpha Architect]

    The study emphasizes the importance of integrating machine learning with other tools for investment managers, pension-plan administrators, financial advisors, and independent analysts to help investors select active mutual funds with positive alpha. It also highlights the significance of fund characteristics in predicting alpha, even when portfolio holdings are not disclosed.

Quantocracy’s Daily Wrap for 12/18/2023

This is a summary of links featured on Quantocracy on Monday, 12/18/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Spearman’s rank correlation of technical indicators [Grzegorz Link]

    RSI, MACD, Stochastic, ROC, CCI, %b – technical indicators come in many shapes and sizes.[1] Their names suggest something very technical at play. Maybe even scientific. Yet, they are a polarizing tool. They generate strong, opposing opinions. Some traders value them with near religious zeal, while others despise them as a useless mix of witchcraft and salesmanship, and quite simply, scams. Or at
  • Directional Change in Trading: Indicators, Python Coding, and HMM Strategies [Quant Insti]

    Usually, regime detection is made with an HMM estimation over price returns or price return volatility. However, Chen and Tsang (2021) propose to use the Directional Change indicators as input for a HMM to detect regime shifts. They show that the HMM applied to the Directional Change indicators detects regime shifts better than with an HMM applied to price return volatility. Here we apply
  • How to ingest premium market data with Zipline Reloaded [PyQuant News]

    This article explains how to build the two Python scripts you need to use premium data to create a custom data bundle using Zipline Reloaded. Step 1: Subscribe to premium data By now you should already have an account with Nasdaq Data Link. If not, head over to https://data.nasdaq.com and set one up. Youre looking for QuoteMedia End of Day US Stock Prices. This product offers end-of-day prices,

Quantocracy’s Daily Wrap for 12/16/2023

This is a summary of links featured on Quantocracy on Saturday, 12/16/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Are Alternative Social Data Predictors Useful for Effective Allocation to Country ETFs? [Quantpedia]

    The part of the attention of our own research from the last few months was a little skewed on the side of countries indices and their corresponding ETFs representing them, and we finally conclude our trilogy of investigation on the efficiency of these markets. Firstly, we analyzed price-based valuation measures, and then, in November, we investigated the impact of military expenditures on
  • The Temptation of Factor Timing [Alpha Architect]

    The timing of equity factor premiums has a strong allure for investors because academic research has found that factor premiums are both time-varying and dependent on the economic cycle. For example, Arnav Sheth and Tee Lim, authors of the December 2017 study Fama-French Factors and Business Cycles, examined the behavior of six Fama-French factorsmarket beta (MKT), size (SMB), value
  • Pick the best strike and expiration for trading options [PyQuant News]

    One of the hardest parts of trading options is picking the best strike price and expiration date for your strategy. Whether a simple covered call or more complex strangles, the key to success is constructing the position. But backtesting options is tough: There are millions of contracts that trade daily, they expire weekly, and are assigned if deep in the money. Recently, I stumbled on Optopsy

Quantocracy’s Daily Wrap for 12/13/2023

This is a summary of links featured on Quantocracy on Wednesday, 12/13/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • How Much Damage Can I Do Turbo-Punting Shitcoins? [Robot Wealth]

    Here in Australia, were right in the depths of the silly season. We indulge in long lunches, take days off work, and generally let our hair down. In that spirit, I thought I might have some fun punting shitcoins. (Maybe my definition of fun differs from yours, but lets run with it). For the uninitiated, the technical definition of a shitcoin is a recently launched cryptocurrency of dubious

Quantocracy’s Daily Wrap for 12/12/2023

This is a summary of links featured on Quantocracy on Tuesday, 12/12/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Portfolio optimisation, uncertainty, bootstrapping, and some pretty plots. Ho, ho, ho [Investment Idiocy]

    Twas the night before Christmas, and all through the house…. OK I can't be bothered. It was quiet, ok? Not a creature was stirring… literally nothing was moving basically. And then a fat guy in a red suit squeezed through the chimney, which is basically breaking and entering, and found a small child waiting for him (I know it sounds dodgy, but let's assume that Santa has been DBS
  • Why A New High Before A Fed Day Is Discouraging [Quantifiable Edges]

    Wednesday is a Fed Day. Fed Days have historically shown an upside tendency. I have documented this tendency in great detail over the years. A higher close today would not be the most favorable Fed Day setup. A big reason for this is that it would mark a 20-day high close. Fed Day bullishness has often occurred when a Fed announcement has helped to alleviate market stress. When the market closes

Quantocracy’s Daily Wrap for 12/11/2023

This is a summary of links featured on Quantocracy on Monday, 12/11/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Managed Futures Rotation [Return Sources]

    Managed futures / trend following is a valuable strategy to have in a portfolio, but it's also somewhat difficult to hold. The reason is that its positive performance tends to come in bursts, as opposed to steadily over time. This can (and does) lead to frustration as the investment in managed futures stagnates or falls over a period of years. I suspect that this property of trend following
  • The Illusion of the Small-Cap Premium [Finominal]

    Small-cap investing is intuitively appealing However, small-caps have underperformed in most markets Screening out low-quality small-caps has not helped significantly INTRODUCTION Investing means parting ways with your money, which is not something we tend to do lightly. The easiest way to get comfortable with an investment opportunity is if great performance is accompanied by a great story. The

Quantocracy’s Daily Wrap for 12/10/2023

This is a summary of links featured on Quantocracy on Sunday, 12/10/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Brownian Motion Simulation with Python [Quant Start]

    In this article we will explore simulation of Brownian Motions, one of the most fundamental concepts in derivatives pricing. Brownian Motion is a mathematical model used to simulate the behaviour of asset prices for the purposes of pricing options contracts. A typical means of pricing such options on an asset, is to simulate a large number of stochastic asset paths throughout the lifetime of the
  • Simulation of Gary Antonacci s Dual Momentum Sector Rotation Strategy [NLX Finance]

    Heres a backtest of Gary Antonaccis DMSR (Dual Momentum Sector Rotation) strategy. The author is best known for his GEM (Global Equity Momentum) strategy, which he popularised in 2014, in his book Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk , McGraw-Hill Education. As a reminder, GEM (Global Equity Momentum) is a strategy that is well known to

Quantocracy’s Daily Wrap for 12/09/2023

This is a summary of links featured on Quantocracy on Saturday, 12/09/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Adaptive Asset Allocation Replication [Foss Trading]

    The paper, Adaptive Asset Allocation: A Primer by Adam Butler, Mike Philbrick, Rodrigo Gordillo, and David Varadi addresses flaws in the traditional application of Modern Portfolio Theory related to Strategic Asset Allocation. It shows that estimating return and (co)variance parameters over shorter time horizons are superior to estimates over long-term horizons because parameter estimates
  • The Art and Science of Trading Carry [Robot Wealth]

    Lets talk about carry trades. First, what exactly is a carry trade? A carry trade is a trade that pays you to hold it. A position where, if nothing changes except the passing of time, you expect to make money. Lets go through some examples. FX carry The classic example is the FX carry trade, where you borrow a low-yielding currency to buy a high-yielding one and profit from the interest
  • Diseconomies of Scale in Investing [Alpha Architect]

    Abstract: One of the problems for investment funds is that success contains the seeds of destruction as cash inflows follow outperformance. In his seminal 2005 paper, Five Myths of Active Portfolio Management, Jonathan Berk suggested asking, Who gets money to manage? He answered that since investors have access to databases that provide returns histories, and everyone wants to have

Quantocracy’s Daily Wrap for 12/06/2023

This is a summary of links featured on Quantocracy on Wednesday, 12/06/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The “Strike Price” of Long-Only Trend Following [Return Sources]

    Long-only trend following is a popular way to protect equity portfolios from huge drawdowns, and for several good reasons: 1) It has the advantage of behaving somewhat like insurance, or put options, in that youre exposed to much of the upside and not much of the downside. 2) It doesnt damage your returns as much as buying put options does. (Notice how I said that it doesnt damage your
  • How to stream real-time options data [PyQuant News]

    Ive been trading options contracts for more than 23 years. When I started out, I had to rely on expensive broker data feeds for real-time options data for trading and low-quality free data I scraped from websites for analysis. I spent countless hours reverse engineering the CBOE website for real-time options data, only to have my IP address blocked. I spent $1,125 on 5 years of historic options
  • Forecasting time series with decomposition [PyQuant News]

    In todays newsletter, Im going to show you how to forecast a time series of US unemployment data using decomposition. Time series decomposition is breaking down a single time series into different parts. Each part represents a pattern that you can try to model and predict. The patterns usually fall into three categories: trend, seasonality, and noise. Time series decomposition models are
  • After-Tax Performance of Actively Managed Funds [Alpha Architect]

    Market efficiency, higher trading costs and higher expense ratios are not the only hurdles to successful active management (market timing and individual security selection). For taxable investors, the burden of higher taxes raises the hurdle.(1) From 2002 until now, S&P Dow Jones Indices has published its S&P Indices Versus Active (SPIVA) Scorecard, comparing the performance of actively

Quantocracy’s Daily Wrap for 12/01/2023

This is a summary of links featured on Quantocracy on Friday, 12/01/2023. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Cloud or Local: Where to Run Your Quant Trading? [Quant Rocket]

    Is it better to run your quant trading in the cloud or locally? In this article, I outline the pros and cons of each approach and explain why running locally is often better for research while running in the cloud is better for live trading. Don't assume the cloud is better It's common to imagine that every serious workload should run in the cloud. We associate the cloud with modern,