Quantocracy

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Quantocracy’s Daily Wrap for 05/17/2015

This is a summary of links featured on Quantocracy on Sunday, 05/17/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Interview with Rob Hanna [Better System Trader]

    Rob Hanna has been a full-time market professional since 2001. He first began publishing his market views and research in 2003. From 2003 to 2007 his column Rob Hannas Putting It All Together could be found twice a week on TradingMarkets.com. In 2008 Rob began Quantifiable Edges and in 2012 Rob opened his 2nd website, Overnight Edges. Both sites use historical analysis
  • Shorting extremes in a bear market [Better System Trader]

    In Episode 7 of the podcast Rob Hanna provides an idea for shorting extremes in a bear market: I got one in bear markets that shows all right, what happens if you sold short every 20 day high below the 200 day moving average or something like that and exited when it got back below the 20 day moving average or 10 day moving average or something like that. Its really si

Quantocracy’s Daily Wrap for 05/16/2015

This is a summary of links featured on Quantocracy on Saturday, 05/16/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Quant Geek Weekend Homework: Academic Finance Research [Alpha Architect]

    Post-discovery Performance: Will Anomalies Fade Away After Discovery? (Qu, Lu, Sun and Yan) The Search for Crisis Alpha: Weathering the Storm Using Relative Momentum (Newfound Research) Are Your Backtest Results fooling you? Try Monte Carlo Analysis (Better System trader) Buffetts Alpha (Frazzini, Kabiller and Pedersen) (older, but good)
  • Quasi-Maximum Likelihood [Eran Raviv]

    Beauty.. really? well, beauty is in the eye of the beholder. One of the most striking features of using Maximum Likelihood (ML) method is that by merely applying the method, conveniently provides you with the asymptotic distribution of the estimators. It cant get more general than that. The how you do, not the what you do permits proper inference. The only caveat, thou

Quantocracy’s Daily Wrap for 05/15/2015

This is a summary of links featured on Quantocracy on Friday, 05/15/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Singular Value Diversification Strategy [John Orford]

    Being a loser is an art. I am not interested in being a good loser, but in knowing when to quit. The art of quitting can be acquired after a little numerical analysis. (Not necessarily due to all the confusing linear algebra!) In the world of numerical solutions there is no correct answer. Knowing when your search for an answer is 'goo
  • New related paper to #5 – FX Carry Trade [Quantpedia]

    The paper gives evidence of a novel pricing factor for the cross-section of carry trade returns based on trade relations between countries. In particular, we apply network theory on countries' bilateral trade to construct a measure for countries' exposure to a global trade risk. A higher level of exposure implies that the economic activity in one country is highly dependent on the econo
  • Another commodity hits bull market threshold $UNG [@NautilusCap]

    Another commodity hits bull market threshold $UNG
  • Live Trading with Interactive Brokers [Quant Connect]

    We're very proud to announce our public release of live trading with Interactive Brokers! Now you can seamlessly design and trade your algorithm within QuantConnect. Automated live trading is one of the most challenging engineering problems in financial technology. It involves controlling large financial resources, while pushing computational power to its limits!
  • Lazy Backtest IDE Update [John Orford]

    Another week another Lazy Backtest IDE update. Now you can incorporate yield data into your strategies, oh, and also use it in your Sharpe ratio calculations. Also – no one likes little black boxes, right? No one! So, I included a link to download a CSV file of results. Meaning you can understand calculations in a spreadsheet – plus gr

Quantocracy’s Daily Wrap for 05/12/2015

This is a summary of links featured on Quantocracy on Tuesday, 05/12/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • The Top 5 UK Universities For Becoming A Quant [Quant Start]

    In a previous article I outlined the best degree courses to take in order to help you get a job as a quant. I also mentioned that to discuss the best UK universities was an article in itself. This is that article! Coincidentally, the QS World University Rankings for 2014/15 have just been released and some of the best UK universities have made it into the Top 10. While rank
  • Stock Indicator Suggests Big Move (Lower?) Coming [Dana Lyons]

    We dont talk too often (because we dont use them) about traditional technical analysis indicators. We have nothing against them; its just that we have our own methodologies and processes that work for us. One indicator we do like to keep an eye on is the ADX, or Average Directional Index. It is essentially an indicator of the strength (or lack of strength) of the prevailing trend ove
  • Material improvement $XLB [@NautilusCap]

    Material improvement $XLB
  • One of My Favorite Websites for Trading Systems and Ideas [Jay On The Markets]

    A while back I got over my addiction to Elliott Wave analysis. I finally realized I needed help and joined a five wave, er, step program. But some obsessions still linger. As an admitted "systemaholic" ("Hi, my name is Jay") I am always on the lookout for new ways to make money without thinking. That's actually not quite a fair statement. With a trading system you do your
  • Be Careful How You Play Rising Rates [Flirting with Models]

    Many recent articles discuss rising rates with a focus on how to weather them along with some predictions of when they will occur and how much they will rise. Duration is a common theme among the articles since it quantifies how much a particular bond is likely to lose when rates rise. We've written many blog posts in the past about duration (for instance: this and this), and earlier th
  • The Case Against High Yield [EconomPic]

    Following up on my post The Relationship Between Stocks and Bonds, which outlined why it is probable that stocks will outperform Treasury Bonds over the next 10 years, let's take a look at what appears to be another expensive area of the bond universe… high yield U.S. corporate bonds. High yield bonds: Where's the high yield? As the right-hand chart be
  • Machine Learning in Forex Trading: Why many academics are doing it all wrong [Mechanical Forex]

    Building machine learning strategies that can obtain decent results under live market conditions has always been an important challenge in algorithmic trading. Despite the great amount of interest and the incredible potential rewards, there are still no academic publications that are able to show good machine learning models that can successfully tackle the trading problem in the real m
  • Q&A with Wes Gray on value and momentum part two [Abnormal Returns]

    A recent paper by Cam Harvey and his co-authors on the statistical validity of many so-called finance anomalies has attracted a great deal of attention in quantitative finance crowd. It seemed worthwhile to discuss the implications of the paper with one of our favorite quants, Wes Gray of Alpha Architect and manager of the ValueShares US Quantitative Value ETF ($QVAL) and the ValueShare
  • New Backtesting Platform: Quantler

    Quantler is an online trading system development and analysis platform, that uses templates to (co-)create new algorithms. You can develop your own templates or reuse existing ones. With Quantler, you can test your ideas quick and easy. Entry Entry templates tell us when, where and how we enter the markets. Timing is everything, efficiency is of vital i
  • Equity Ranking Backtest with Python/Pandas [Shifting Sands]

    I have been look at equities a bit of late, I am particularly interested in ranking a universe of equities for low frequency manual trading on a weekly or monthly basis. Every period I would rank each name on a bunch of different factors, then invest in the highest ranked ones for that month. I was initially working in R but the code grew unwieldy, and I want
  • Quantifying Technical Analysis [John Orford]

    I have disavowed myself from technical analysis. Life's too short. Similar to Saruman however, the lure of more power is drawing me perilously close to an ancient and dark evil. To paraphrase Nietzsche, When you take a long gaze into the financial blogosphere, the blogosphere also gazes back into you Prices are used in
  • Dual Momentum May Update [Scott’s Investments]

    Scotts Investments provides a free Dual ETF Momentum spreadsheet which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum. Antonacci has a new book out, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk. If you want to see how he applies Dual Momentum t
  • [Academic Paper] Improving Neural Networks by Preventing Co-adaptation of Feature Detectors [@Quantivity]

    Improving Neural Networks by Preventing Co-adaptation of Feature Detectors
  • [Academic Paper] DART: Dropouts meet Multiple Additive Regression Trees [@Quantivity]

    DART: Dropouts meet Multiple Additive Regression Trees

Quantocracy’s Daily Wrap for 05/10/2015

This is a summary of links featured on Quantocracy on Sunday, 05/10/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Interview with Dr Howard Bandy [Better System Trader]

    Dr Howard Bandy has university degrees in mathematics, physics, engineering and computer science, completing graduate studies and research in modelling and simulation, statistics and some of the early work in artificial intelligence. He has over 50 years experience in research and applications of modelling and simulation of financial systems. Howard has previou
  • Cornish Fisher Strategy Discussion [John Orford]

    A reader got in touch with me asking for more details on Peter Urbani's Cornish Fisher strategy. It's a pull-all-your-money-of-the-table strategy designed to avoid catastrophic losses and keep returns compounding smoothly over time. How do we think about potential catastrophic returns? By measuring skewness and kurtosis of course! If w

Quantocracy’s Daily Wrap for 05/09/2015

This is a summary of links featured on Quantocracy on Saturday, 05/09/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Quant Geek Weekend Homework: Academic Finance Research [Alpha Architect]

    The Five-Factor Fama-French Model: International Evidence (Nusret Cakici) Doubt on Five-Factor Fama-French Model: Is it Just in Essence a Noise? (Hou, Xue and Zhang) Stocks with Negative Analyst Forecast Skewness tend to be undervalued? (Cai Zhu) Covering-Up When the Tide Goes Out? Momentum Seasonality and Investor Preferences (Barradale) Industry Herding and Mom
  • Real Momentum: A Longer-Term Backtest [CSS Analytics]

    In the last post I introduced the concept of real momentum which is a trend following signal based on real returns. In the post I used both expected inflation and risk-free returns to net out from the S&P500 to create a real excess return. This was done to make the hurdle for buy positions higher than the standard method. Several comments from readers indicated that this isdouble-cou
  • Steady Volatility Strategy [John Orford]

    The art and skulduggery of finance is infused with uncertainty. So, how about we try to smooth volatility a little and see the consequences? The VIX predicts the volatility of the S&P 500 for the next thirty days. Our Steady Vol strategy takes the inverse of the current VIX and weighs our holding in the S&P 500 accordingly. If predicti

Quantocracy’s Daily Wrap for 05/07/2015

This is a summary of links featured on Quantocracy on Thursday, 05/07/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Sector Rotation with PnF Matricies [Systematic Relative Strength]

    Watering the flowers and pulling the weeds. Letting your winners run and cutting your losers short. There are different expressions for sector rotation, but it is among the most profitable investment strategies we have found, when done in a disciplined way. Sector rotation is based on the idea that there tends to be differencessometimes large differencesin performance between vario
  • A Guide to Creating Your Own Hedge Fund [EconomPic]

    As a follow-up to A Guide to Creating Your Own Smart Beta Fund, let's dive into the high flying paying world of hedge fund management.. Per Investopedia: Hedge funds are alternative investments using pooled funds that may use a number of different strategies in order to earn active return, or alpha, for their investors. Hedge funds may be aggressively mana
  • Combining Value Investing and Momentum Investing (Part 2) [Alpha Architect]

    A few weeks ago I wrote an article talking about ways to combine value investing and momentum investing. The high level takeaway from that article was to keep value and momentum as separate exposures. This conclusion was based on ranking firms on their combined value and momentum rankings, which can be described as follows: Rank all stocks on value Rank all st
  • Should Europe decline extend to 10%… [@NautilusCap]

    Should Europe decline extend to 10%…
  • Investing in Leveraged ETFs – Theory and Practice [Jonathan Kinlay]

    Summary Leveraged ETFs suffer from decay, or beta slippage. Researchers have attempted to exploit this effect by shorting pairs of long and inverse leveraged ETFs. The results of these strategies look good if you assume continuous compounding, but are often poor when less frequent compounding is assumed. In reality, the trading losses incurred in r
  • Real Momentum: A Time-Series/Absolute Momentum Strategy Including Inflation Expectations [CSS Analytics]

    Time-Series Momentum was introduced by Moskowitz and Pedersen of AQR circa 2011 and was popularized by Antonacci in 2013 as Absolute Momentum. Both measure the return of an asset in excess of the risk-free rate over some lookback window in order to determine whether to hold a long position in a given asset or whether to hold cash or go short. This method has been used by trend-foll
  • Hacking Google Finance in Real-Time for Algorithmic Traders. (2) Pre-Market Trading [Quant at Risk]

    It has been over a year since I posted Hacking Google Finance in Real-Time for Algorithmic Traders article. Surprisingly, it became the number one URL of QaR that Google has been displaying as a result to various queries and the number two most frequently read post. Thank You! Its my pleasure to provide quality content covering interesting topics that I find potentially useful.
  • Despite Historic Compression, Stocks Remain Range-Bound [Dana Lyons]

    On April 24, we posted what we thought (and hoped) would be our final post concerning the stock markets lengthy trading range. In the post we noted that for only the 8th time in 100 years, the Dow Jones Industrial Average (DJIA) had made it to 30 days without hitting either a 1-month high or low. It was, in our view, a pretty remarkable stat. Little did we know, however, that 8 days la
  • Dividend Champion Portfolio Update [Scott’s Investments]

    The High Yield Dividend Champion Portfolio is a publicly tracked stock portfolio on Scotts Investments. Its goal is to capture quality high yield stocks with a history of raising dividends. The screening process for this portfolio starts with the Dividend Champions as compiled by DRIP Investing. The list is comprised of stocks that have increased their dividend payout f
  • RUT Iron Condor – Dynamic Exit – 80 DTE – 12 Delta Continued [DTR Trading]

    This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of the 80 days-to-expiration (DTE) Iron Condor (IC), with 12 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs were all constructed with 20 point wide credit spreads. This is a non-directional option

Quantocracy’s Daily Wrap for 05/06/2015

This is a summary of links featured on Quantocracy on Wednesday, 05/06/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Sharpe Ratio Redux [John Orford]

    My favourite restaurant in Singapore is near City Hall. Nalan's serves up the tastiest vegetarian food going. Every couple of weeks I go back and find a new and interesting dish. At lunch today my girlfriend ordered Manchurian cauliflower. Deep fried cauliflower in a Hokkien Chinese sauce which usually coats chicken. Think you know cauliflower? Not
  • New commodity bull market? [@NautilusCap]

    New commodity bull market?
  • How good is Smart Beta? [Alvarez Quant Trading]

    How good is Smart Beta? A popular topic lately has been Smart beta ETFs. What is smart beta? It is using different ways to weight an index and the ETF that tracks it. For example, the S&P500 index is a capitalization weighted index. Bigger companies have a larger portion of the index. If you look at the SPY, Apple which is the largest company, accounts for 4% of the index
  • The Search for Crisis Alpha: Weathering the Storm Using Relative Momentum [Flirting with Models]

    As we announced a few weeks back, our own Nathan Faber won 2nd place in the 2015 NAAIM Wagner Award paper competition for his research paper The Search for Crisis Alpha: Weathering the Storm Using Relative Momentum. Here's the abstract: Tactical strategies are becoming more prevalent in the marketplace, especially for downside protection. While many of thes
  • Momentum AND Diversification: A powerful risk-adjusted combination [Flirting with Models]

    As we announced a few weeks ago, our very own Andrew Gogerty won 3rd place in the 2015 NAAIM Wagner Award paper competition for his research paper Momentum AND Diversification: A powerful risk-adjusted combination. Here's the abstract: Diversification is discussed in nearly every portfolio construction conversation as a risk management tool. Momentum, on th
  • State of Trend Following in April [Au Tra Sy]

    A negative month in April for the State of Trend Following report, taking the performance below the break-even line for 2015. Please check below for more details. Detailed Results The figures for the month are: April return: -5.71% YTD return: -0.88% The figures above, compared with those in the State of Trend Following report I r
  • RUT Iron Condor – Dynamic Exit – 80 DTE – 12 Delta [DTR Trading]

    In this post we will look at the backtest results for dynamic exits of the 80 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 12 delta short strikes, with different profit and loss exits. This is a non-directional options trading strategy that seeks to profit from a market that stays within a range between the two short strikes of the Iron Condor. For some
  • More Value Facts And Fiction [Larry Swedroe]

    Earlier this week, we began discussing some of the more pervasive and enduring facts and fictions surrounding the value premium. But it's important to understand that the value premium-a phenomenon in which securities that sell at low prices relative to fundamental metrics outperform on average securities that sell at high relative prices-is an empirical fact.
  • Cornish Fisher Timing Strategy Video [John Orford]

    Peter Urbani sent me a timing strategy based on the Cornish Fisher expansion. The world of cumulants is new and fascinating. I took the liberty to code up the strategy using the Backtesting IDE. The contrast between using spreadsheets and code for this type of strategy is stark. Download the code here.

Quantocracy’s Daily Wrap for 05/05/2015

This is a summary of links featured on Quantocracy on Tuesday, 05/05/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • A Recipe for the 2008 Financial Crisis [Stuart Reid]

    In 2008 when the market crashed I was 16-years old and visiting London for the very first time. At that age I was already obsessed with the markets. Feeling confident that I could understand the crash after having read books like Security Analysis, The Intelligent Investor, and Common Stocks and Uncommon Profits, I bought a copy of the Financial Times and started reading. I didn't under
  • New related paper to #12 – Pairs Trading with Stocks [Quantpedia]

    This paper tests the Pairs Trading strategy as proposed by Gatev, Goetzmann and Rouwenhorts (2006). It investigates if the profitability of pairs opening after an above average volume day in one of the assets are distinct in returns characteristics and if the introduction of a limit on the days the pair is open can improve the strategy returns. Results suggest that indeed pairs opening
  • Data Science and Trading: Common Problems [Inovance]

    Data science is becoming more and more accessible to more and more people. Amazon launched Amazon Machine Learning last month, Microsoft Azure has been available for some time now and IBM is pushing to commercialize Watson more than ever before. While there is a lot of hype surrounding some of the hot topics in data science, there is a good reason some of the largest firms
  • The Value Proposition. Downtrend signal in growth/value. $IWD [@NautilusCap]

    The Value Proposition. Downtrend signal in growth/value. $IWD
  • Value Investing Research: Simple Methods to Improve the Piotroski F-Score [Alpha Architect]

    In this article, we identify how we can improve the performance of the F-Score and enhance a generic value investing approach. In a 2000 study, "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (Journal of Accounting Research, 2000), Joseph Piotroski examined whether an investor could improve his or her investment retur
  • State of Trend Following – August 2014 [Wisdom Trading]

    April 2015: Trend Following DOWN -2.58% YTD: +7.77% Consolidation for the State of Trend Following index in April. Most systems in the index closed underwater, with most of the downwards action happening in the last two days of the month, before which the index was still above the break-even line. Below is the full State of Trend Following report as of last
  • Daily Academic Alpha: Credit Spreads and Stock Returns [Alpha Architect]

    The Term Structure of Credit Spreads and the Cross-Section of Stock Returns We explore the link between credit and equity markets by considering the informational content of the term structure of credit spreads. A shallower credit term structure predicts decreases in default risk, increases in future profitability, as well as favorable earnings surprises, and vice versa
  • Rising Yield Trend $TLT [@NautilusCap]

    Rising Yield Trend $TLT
  • No… Investors Haven’t Underperformed Every Asset Class [EconomPic]

    The following chart has been floating around for more than a year, supposedly showing investors have not only performed poorly, but even worse than almost any asset class. As Richard Bernstein stated: The average investor underperformed nearly every asset class. They could have improved performance by simply buying and holding any asset class other than Asian emerging m

Quantocracy’s Daily Wrap for 05/04/2015

This is a summary of links featured on Quantocracy on Monday, 05/04/2015. To see our most recent links, visit the Quant Mashup. Read on readers!