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Quantocracy’s Daily Wrap for 06/15/2015

This is a summary of links featured on Quantocracy on Monday, 06/15/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 06/14/2015

This is a summary of links featured on Quantocracy on Sunday, 06/14/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Interview with Ralph Vince [Better System Trader]

    Ralph Vince is a trading systems expert who has been programming trading systems for fund managers, sovereign wealth funds and staking systems for "professional gamblers," since the early 1980's, working as a personal programmer to legendary traders like Larry Williams. He is a recognized authority on position sizing in trading and has written numerous books and professiona
  • Predicting Heavy and Extreme Losses in Real-Time for Portfolio Holders [Quant at Risk]

    The probability of improbable events. The simplicity amongst complexity. The purity in its best form. The ultimate cure for those who trade, for those who invest. Does it exist? Can we compute it? Is it really something impossible? In this post we challenge ourselves to the frontiers of accessible statistics and data analysis in order to find most optimal computable solutions to this en

Quantocracy’s Daily Wrap for 06/13/2015

This is a summary of links featured on Quantocracy on Saturday, 06/13/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Momentum and Stop Losses [Dual Momentum]

    Stop losses are a form of trend following in which you switch from risky assets, such as stocks, to a risk-free or fixed income asset after there are pre-determined cumulative losses. The random walk hypothesis (RWH) was widely accepted in the 1960s and 1970s. It was synonymous with market efficiency. It effectively eliminated any academic interest in stop loss rules. Under RWH, with st
  • An Overview of Market (In)efficiency Research [John Orford]

    Always outnumbered but never outgunned. That's how the saying goes. But this time you are outgunned and staring death squarely in the face. In the moments before your final reckoning, you think about your children, husband – and the impending invasion. This is it. And that is precisely what economists face every day hen fo
  • Using the Price to Sales Ratio [Investor’s Field Guide]

    Price to sales is a very simple valuation ratio. It has the tendency to bias you towards lower margin and higher debt companies, all else equal, but it has still been a very effect measure of cheapness and a fine standalone factor for stock selection. Having explored the history of the ratio, lets now turn to its measurement and usefulness in stock selection. Here is a sum
  • Max Wait [John Orford]

    There's a phrase or attitude in and around Java called pasrah. Maybe it's dying out only surviving in some out of the way places which haven't been totally submerged in bit and bytes. Pasrah means 'resignation'. Train doesn't come on time? Pasrah. Stuck in a humungous queue? Pasrah. Stranded in your car in the middle of Ja

Quantocracy’s Daily Wrap for 06/12/2015

This is a summary of links featured on Quantocracy on Friday, 06/12/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Performance and correlated assets [Quant Dare]

    It is well known that an efficient portfolio should be comprised by uncorrelated assets. The objective is to cover possible widespread falls of all portfolios assets. But, what actually is the negative effect of investing in correlated assets? Does the correlation benefit at anytime? How often does the correlation work against the earnings? Firstly, we focus on S&P500 in o
  • Dual Momentum June 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. Antonaccis book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk, also details Dual Momentum as a total portfolio strategy. My
  • Momentum Across Time & Asset Classes [Larry Swedroe]

    The academic study of price momentum has intensified considerably since 1993, the year Narasimhan Jegadeesh and Sheridan Titman's paper, "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," appeared in The Journal of Finance. The authors found that buying winning stocks and selling losers generated significant positive returns over three- to
  • Lazy PCA Site [John Orford]

    Lots of posts in the past week about breaking down time series returns into momentum and mean reversion. Vix Equity Momentum Mean Reversion + Momentum strategy Now you can PCA too! I have added an interface to the code I have been using and called it Lazy PCA. Try it out and let me know what you think!

Quantocracy’s Daily Wrap for 06/10/2015

This is a summary of links featured on Quantocracy on Wednesday, 06/10/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Using Profitability as a Factor? Perhaps You Should Think Twice… [Alpha Architect]

    Many investors are getting excited about the so-called profitability factor, originally posed by Novy-Marx (here is an alternative story) . Larry Swedroe has a high-level piece advocating the concept here. The basic idea is simple: Other things being equal, firms with high gross profits (revenue costs) have earned higher expected returns than firms with low gross profit
  • PCA & Momentum [John Orford]

    Check out the first and second posts in this series to get up to speed. This is a picture of AAPL's monthly returns over the last 3 years. It shows ever so slightly more momentum than mean reversion as the ellipse is pointing up right. In contrast to the previous equity and Vix pictures the plotted data is pretty centred. I would bet that AAPL has
  • New related paper to #21 – Momentum Effect in Commodities and #22 – Term Structure Effect in Commodities [Quantpedia]

    #21 – Momentum Effect in Commodities #22 – Term Structure Effect in Commodities Authors: Benham, Walsh, Obregon Title: Evaluating Commodity Exposure Opportunities Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2602885 Abstract: Commodities as an asset class have been in growing demand over the last 40 years

Quantocracy’s Daily Wrap for 06/09/2015

This is a summary of links featured on Quantocracy on Tuesday, 06/09/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Lessons from Market Extremes [Investor’s Field Guide]

    We know that markets overdo it at extremes. At the market level, we call these bubbles or manias, panics or crashes. At the stock level, we call them glamour and value. Lets collect some lessons from the best performing stocks from the two categories where investors have the most extreme (good or bad) expectations for the futurevalue and glamour stocks. A quick definition
  • Fixing Empirical Finance [CXO Advisory]

    What are the most pressing systematic weaknesses in financial research, and how should the investment community address them? In the May 2015 version of his article entitled The Future of Empirical Finance, Marcos Lopez de Prado identifies three major problems in empirical finance and proposes ways to mitigate them. Based on his experience and common sense arguments and references
  • Chapter 11 – Comparison of the Strategies [Meb Faber]

    This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and Ill send you a free copy. – I believe in the discipline of mastering the best that other people have ever figured out. I dont believe in just sitting there and trying to dream it up all yourself. Nobodys that smart.
  • Chapter 10 – The Warren Buffett Portfolio [Meb Faber]

    This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and Ill send you a free copy. – Warren Buffett mentioned asset allocation instructions for his trust in his 2013 shareholder letter: What I advise here is essentially identical to certain instructions Ive laid o
  • Chapter 9 The Endowment Portfolio [Meb Faber]

    This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and Ill send you a free copy. – Because for any given level of return, if you diversify, you can generate that return with a lower risk; or for any given level of risk, if you diversify, you can generate a higher return. So
  • Equity through a PCA Lens [John Orford]

    Last time I had a look at the Vix's returns plotted against each other with a quarter lag. Now I am doing the same with the S&P 500. Whereas the Vix's returns were mostly found in the bottom left corner and reflected positive skew, I promised equities would be in the top right and imply negative skew. The S&P 500 however is fairly centred, the larg
  • The Utilities Divergence $XLU [@NautilusCap]

    The Utilities Divergence $XLU
  • RUT Iron Condor – High Loss Threshold – 52 DTE [DTR Trading]

    This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 52 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester. For background on the setup for the backtests, as well as the nomenclature used in the charts and tables below, please see the introducto
  • [Academic Paper] Working Your Tail Off: Active Strategies vs. Direct Hedging [@Quantivity]

    Working Your Tail Off: Active Strategies vs. Direct Hedging

Quantocracy’s Daily Wrap for 06/04/2015

This is a summary of links featured on Quantocracy on Thursday, 06/04/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 06/03/2015

This is a summary of links featured on Quantocracy on Wednesday, 06/03/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 06/01/2015

This is a summary of links featured on Quantocracy on Monday, 06/01/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • SPX Iron Condor – High Loss Threshold Results Summary [DTR Trading]

    Over the last four blog posts we looked at eight different exit approaches for a standard SPX iron condor with 25 point wings. These exits included: STD – NA%:NA% – exit at 8 DTE. STD – NA%:50% – exit if the trade has a profit of 50% of its initial credit OR 8 DTE. STD – 100%:50% – exit if the trade has a loss of 100% of its initial credit OR if the
  • Ignore the Margin Debt Alarm [EconomPic]

    Ignore the Margin Debt Alarm The margin debt alarm has seemingly been sounded every few months when investors realize absolute levels of margin debt has reached new all-time highs (inferring that risk taking has too reached all-time high levels and stocks are at risk). This brief post highlights why any such alarm (and any future margin debt alarm) should likely be ignored.
  • Fooled by Monte Carlo Analysis [System Trader Success]

    Simple Monte Carlo analysis tools are often used to assess the risks of trading systems and to determine appropriate capitalization levels. However, simple trade reshuffling algorithms can produce misleading results in many cases and fool their users. There are several Monte Carlo analysis tools available to traders. Some of these are even distributed for free via popular f
  • Investors Pay Premiums For Bad Bets [Larry Swedroe]

    The first formal asset pricing modelthe capital asset pricing modelwas built on certain assumptions, including that investors are risk-averse; will maximize the expected utility of absolute wealth; and care only about the mean and variance of return. However, academic research has found that these assumptions dont necessarily hold. In the real world, some

Quantocracy’s Daily Wrap for 05/30/2015

This is a summary of links featured on Quantocracy on Saturday, 05/30/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Chapter 5 The Permanent Portfolio [Meb Faber]

    This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and Ill send you a free copy. – Harry Browne was an author of over 12 books, a one-time Presidential candidate, and a financial advisor. The basic portfolio that he designed in the 1980s was balanced across four simple assets
  • What Do Falling Corporate Profits Mean With Stocks Near Their Highs? [Dana Lyons]

    If youve followed this blog for awhile, you may have noticed that we dont cover fundamental or economic data too often. That is for a good reason: we dont use it, at all. Occasionally, however, a data point will cross the radar that piques our interest for whatever reason. So it is with the current state of U.S. Corporate Profits. The U.S. Bureau of Economic Analysis released the lat
  • Discussing Deep Value and the Acquirer s Multiple at Harvard [Greenbackd]

    A little over a month ago I travelled to Harvard to speak to Michael Parzens business statistics class on Deep Value and the acquirers multiple. Here is the recording of that talk. You can get a free list of the best deep value stocks in the largest 1000 names on The Acquirers Multiple. Buy my new book Deep Value: Why Activist Investors and Other Contrarians
  • Equally Weighted Portfolios [John Orford]

    Old school German and Austrian professors operate on 'academic time'. When you are told to meet at 3, they really mean a quarter past. You wouldn't want to reverse the tables though. Better to be a quarter of an hour too early than too late. I never got the hang of academic time. Same with investing. Rather than getting your fingers bu