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Quantocracy’s Daily Wrap for 07/17/2015

This is a summary of links featured on Quantocracy on Friday, 07/17/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • High Conviction Buybacks [Investor’s Field Guide]

    Large U.S. companies spent nearly half a trillion dollars on net buybacks (cash spent on buybacks less cash raised through issuance) during the 12 months ending 6/30/2015. Thats almost as much as the buyback peak in 2007, which didnt turn out too well. Scary! But hold on. Something that gets lost beneath this broader trend is the level of conviction that the companies r
  • The Price Factor [Factor Wave]

    Stock splits lower the stock price. But what does that mean? Most straightforwardly, do lower price stocks perform better than higher priced stocks? Soosung Hwang and Chensheng Lu examined this and published their results in the paper, "Is Share Price Relevant?". They used survivor-adjusted data for the major US exchanges from 1963 to 2006 and each year formed portfolios co
  • Daily Academic Alpha: Why Women Should make MORE than Men… [Alpha Architect]

    As the proud father of 3 kids (to include 2 daughters), this set of papers, while a bit off the wall, made me smile a bit. In short, there seems to be a negative relationship between women and lawsuitsthe more women surround an organization, the less legal trouble the organization faces. It would be great if the relationship was 100% causal, but the data dont
  • Active Investment Managers and Market Timing [CXO Advisory]

    Do active investment managers as a group successfully time the stock market? The National Association of Active Investment Managers (NAAIM) is an association of registered investment advisors. NAAIM member firms who are active money managers are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day

Quantocracy’s Daily Wrap for 07/15/2015

This is a summary of links featured on Quantocracy on Wednesday, 07/15/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New Paper from Markowitz: Introducing the Gerber Statistic [Flirting with Models]

    Harry Markowitz, father of modern portfolio theory, has a new paper out with Sander Gerber and Punit Pujara titled Enhancing multi-asset portfolio construction under Modern Portfolio Theory with a robust co-movement measure. You can download it here. The big take away is the introduction of a new co-movement measure called the Gerber Statistic, which is designed to be more
  • Daily Academic Alpha: Fresh Evidence on the Fama French 5-Factor Model [Alpha Architect]

    The past few weeks weve highlighted a set of research papers that go back and forth on the validity of the Fama and French 5-factor model. A sampling of the research: The Fama French 5-Factor Paper The Kewei, Xue, and Zhang (KXZ) 4-Factor Paper (critically assesses the FF 5-factor model) Cakici investigates the FF 5-Factor Internation
  • A New Factor: Illiquidity [Factor Wave]

    Value, size and low volatility "anomalies" have been studied for decades. Momentum has only been recently recognized by academics but a lot of practitioners have been firm believers in it for many years. Quality is the most recent of the well accepted factors but the components that go into its calculation are well accepted measures of what makes a business good. But we, and a large gro
  • A Diverse Momentum System Using Vanguard Allocation Funds [Scott’s Investments]

    One of the criticisms of momentum systems is they are prone to crashes when momentum reverts. The system highlighted in this article can be implemented using any number of life style or target-risk funds or ETFs. The system chooses from a small number of funds that reflect a range of asset allocation models. The purpose is to employ a diverse, momentum-based asset allocation system.

Quantocracy’s Daily Wrap for 07/14/2015

This is a summary of links featured on Quantocracy on Tuesday, 07/14/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 07/09/2015

This is a summary of links featured on Quantocracy on Thursday, 07/09/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Research Links: Correlation Networks [MKTSTK]

    Evolution of worldwide stock markets, correlation structure and correlation based graphs [arXiv] We investigate the daily correlation present among market indices of stock exchanges located all over the world in the time period Jan 1996 – Jul 2009. We discover that the correlation among market indices presents both a fast and a slow dynamics. The slow dynamics reflects
  • A Mid-Summer’s Night(mare for) Beans [Jay On The Markets]

    Grain prices have a long record of exhibiting seasonal price trends. This is due primarily to the fact that the planting, growing and harvesting cycle in the Midwest remains the same year in and year out. In a nutshell: *Planting begins in early spring *Growing takes place during the summer *Harvesting occurs in the fall
  • New academic paper related to #12 – Pairs Trading with Stocks [Quantpedia]

    We analyse statistical arbitrage with pairs trading assuming that the spread of two assets follows a mean-reverting Ornstein-Uhlenbeck process around a long-term equilibrium level. Within this framework, we prove the existence of statistical arbitrage and derive optimality conditions for trading the spread portfolio. In the existence of uncertainty in the long-term mean and volatility o
  • Light At The End Of The Tunnel For Stocks…Or A Train? [Dana Lyons]

    So much for summer trading. Global markets are getting more interesting by the day. Last week, we wrote a post examining the phenomenon of 90% Down Days. Again, these are days in which at least 90% of volume on the NYSE occurred in declining stocks. Such days have often been signs of selling exhaustion and have often led to intermediate-term rallies. And if there has historically been a
  • The Origins of Momentum [Quants Portal]

    Momentum is a market anomaly which many people have tried to explain but have not succeeded to a satisfactory extent. As to the source of momentum profits, others have tried to rationalize their origins whereas an opposing school of thought has searched for their origins in behavioural finance. In this paper I will explore the possible origins of momentum profits through highlighting th
  • The Mojito Vix ETN Strategy [John Orford]

    I like girls like my asset classes. Bubbly. … What do you mean you don't know whether whether we should take the business or not? All money is green. … I like my cocktails like my money. Green! … ~~ That was the CEO sitting behind a younger me. He didn't have an off
  • Option Strangle Series – Higher Loss Thresholds [DTR Trading]

    During the next several weeks, I will show the backtest results for selling Strangles on the RUT and SPX. The prior post, Introduction To Options Strangles, introduced Strangles and compared them with Iron Condors. For this new series, we will look the following setup: RUT and SPX short strangle backtest setup (click to enlarge) These short Strangles wi

Quantocracy’s Daily Wrap for 07/08/2015

This is a summary of links featured on Quantocracy on Wednesday, 07/08/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • All Strategies Blow Up [GestaltU]

    We are a quantitative finance shop, right down to the ground. All of our portfolios are driven by supervised quantitative models with no discretionary intervention. As such, I was inspired to respond to a recent article on the risk of quant strategies, as I think the way our team approaches quantitative research diverges from how many outsiders perceive quant, and also from how many qua
  • The Comfort of Following the Index by Saarthak Gupta [Factor Wave]

    FactorWave is built on the premise that factors are important investing. And if these factors are so important, then we should be asking ourselves why everyone doesn't seem to use them. If I may briefly invoke the specter of Rational Economic Theory, in an efficient market, these factors shouldn't even exist. So maybe we can beat these "professional investors." And I
  • XIV a heart attack waiting to happen [Alvarez Quant Trading]

    A research friend recently sent me a link to The #1 Stock In The World. Besides being a blatant title to get ones attention (and it worked on me), I found the idea interesting along with my research friends. I have been trying to add either XIV or VXX to my trading in some small way. The article is only doing a buy and hold on XIV but it peaked my interest to try some other ideas.
  • Quantitative Financial Risk Management [Reading the Markets]

    Quantitative Financial Risk Management: Theory and Practice, edited by Constantin Zopounidis and Emilios Galariotis (Wiley, 2015) is a collection of 15 papers, written primarily by academics. The papers deal with five main topics: supervisory risk management, risk models and measures, portfolio management, credit risk modeling, and financial markets. One paper that I think

Quantocracy’s Daily Wrap for 07/06/2015

This is a summary of links featured on Quantocracy on Monday, 07/06/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Video: James Simons – Numberphile [YouTube]

    James Harris Simons has been described as "the world's smartest billionaire", amassing a fortune through the clever use of mathematics and computers. He is now a renowned philanthropist.
  • Adding a VIX Signal to Momentum [EconomPic]

    Michael Batnick, Director of Research at Ritholtz Wealth Management, and blogger of the always interesting Irrelevant Investor, recently shared the historical performance of U.S. stocks when they fall below their 200-day moving average, something that occurred early last week (bold mine, quotes Michael's). Increased odds at a material sell-off When bad
  • Efficient Frontier Portfolios Impractical But Still Useful [Capital Spectator]

    The concept of building optimal portfoliosmaximizing return and minimizing riskis a foundational concept in quantitative finance. Unfortunately, its not terribly practical. The problem, as many researchers have demonstrated over the years, is the elusive aspect of developing reliable estimates of return and risk. Mere mortals are notoriously ill-suited for such things. But crunchin
  • Practical academic paper related to #100 – Trading WTI/BRENT Spread [Quantpedia]

    #100 – Trading WTI/BRENT Spread Authors: Donninger Title: The Poverty of Academic Finance Research: Spread Trading Strategies in the Crude Oil Futures Market Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2617585 Abstract: Harvey, Liu and Zhu argue that probably most of the Cross-Section of Returns literature is garbage
  • Backtesting in Excel: Adding position sizing [Quants Portal]

    In my previous article I started with an example of a vectorised backtest. In this one I will build on homework exercise 2 by adding position sizing. Please download this Excel document to follow the example, Click Here. Now there are many different ways in which to add position sizing and this would generally form part of the risk model. In this example Im going to pair p
  • Prices Convolution, A Practical Approach [Quant Dare]

    othing could be further from my intention than to give an extensive mathematical approach to this post but an slightly idea is desirable. In this post we will approach to the problem of convolution from a matricial point of view. Well, what we mean by convolution is about composing 2 different functions to have a third one. The particularity of the convolution is that we ha
  • China Market Analysis [John Orford]

    The core of capitalism is its extremely democratic nature. The masses crush wily contrarians on a daily basis, The market can stay irrational longer than you can stay solvent Being correct in science however, is never democratic. One contrarian can commit mass killings amongst cherished beliefs. Science progresses
  • [Academic Paper] Can Anomalies Survive Insider Disagreements? [@Quantivity]

    Can Anomalies Survive Insider Disagreements?
  • [Academic Paper] Mispricing Factors [@Quantivity]

    Mispricing Factors

Quantocracy’s Daily Wrap for 07/02/2015

This is a summary of links featured on Quantocracy on Thursday, 07/02/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Time series analysis and data gaps [EP Chan]

    Most time series techniques such as the ADF test for stationarity, Johansen test for cointegration, or ARIMA model for returns prediction, assume that our data points are collected at regular intervals. In traders' parlance, it assumes bar data with fixed bar length. It is easy to see that this mundane requirement immediately presents a problem even if we were just to analyze daily bars
  • For The VIX, It s All About The Recovery [Dana Lyons]

    We mentioned in a post yesterday on 90% Down Days that one of the challenges for risk managers is to correctly distinguish a minor market dip from something that is developing into a more serious decline. One potential aid in addressing that challenge comes from the behavior of the S&P 500 Volatility Index, the VIX. As most market observers are likely aware, the VIX tends to rise duri
  • Insuring tomorrow s decline, today [MKTSTK]

    As of pixel time the VIX is up over 7% and the S&P 500 is basically unchanged; we feel this situation arises when traders desire protection today for the possibility of danger tomorrow. In other words, the price of risk is rising and markets are stabilizing. Intuitively (i.e. the feeling our rat brains get from too many years spent scurrying around the markets) we feel this sets the sta
  • The First Academic Paper with a Shotgun Picture in it [Alpha Architect]

    Here is one of the figures in a Journal of Finance paper published in 2013 by N. Garleanu and L Pedersen. The figure depicts various portfolio optimizations under different assumptions and then has a visualization equivalent with hockey players, skeet shooters, and missile systems. Im not sure how many readers follow hard-core academic publications, but this i

Quantocracy’s Daily Wrap for 06/30/2015

This is a summary of links featured on Quantocracy on Tuesday, 06/30/2015. To see our most recent links, visit the Quant Mashup. Read on readers!