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Quantocracy’s Daily Wrap for 04/20/2015

This is a summary of links featured on Quantocracy on Monday, 04/20/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 04/17/2015

This is a summary of links featured on Quantocracy on Friday, 04/17/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Academic Finance Research [Alpha Architect]

    Understanding Dual, Relative, and Absolute Momentum (Gary Antonacci) Long-short Strategy Simulation based on Front-Page Articles in the WSJ (Matthies and Liu) Am I My Peers Keeper? Social Responsibility in Financial Decision Making (Fulbrunn and Luhan) Employees Will Work Harder Under Loss Contracts than Under Gain Contracts? (Imas, Sadoff and Samek) Are Mutual
  • Bond/Utility Divergence a Warning Sign…for the S&P 500? [Dana Lyons]

    Given their relatively high yields, utility stocks have long been thought of as proxies, or at least competition, for bonds. And while that relationship is often overplayed (utility stocks are first and foremost, stocks), there is some credence to the notion. Since 1970, there is a 26% positive correlation in 2-month returns between 10-Year Treasuries and the Dow Jones Utility Average (
  • If US Stocks Are Expensive, How Do I Protect Myself? [Meb Faber]

    There is a lot of talk about stocks being expensive, but also a lot of people not really doing anything about it. Many simply dont know how to tackle the problem, and others dont want to think about it at all. Below, for some perspective, are historical returns to stocks since 1970 and the 10 worst months for the S&P. On average youre looking at a 11% decline, and that only happen
  • Logical Invest at the Silicon Valley chapter of the AAII & upcoming Webinars [Logical Invest]

    Logical Invest at the Silicon Valley chapter of the AAII & upcoming Webinars What an audience and what an experience! Thanks AAII Silicon Valley! As announced some weeks ago, on April 11 we hosted our first conference at the Silicon Valley chapter of the AAII (American Association of Individual Investors) in San Jose, CA. Sharing and discussing some of th
  • New related paper to #5 – FX Carry Trade [Quantpedia]

    Investors based in different countries earn different returns on same strategies because the same risks covary differently with countries' stochastic discount factors (SDFs). We document that investors in low-interest-rate countries earn more than those in high-interest-rate countries on identical carry trade strategies. We propose a novel econometric procedure to estimate country-speci
  • 1292 Days and Counting Since Last 10% Correction [Almanac Trader]

    Alright, so the S&P 500 declined 1.1% today. That is the worst daily decline since March 25, 2015 when it fell 1.46%. Within this context, todays loss seems far less worrisome than you probably heard today. But, with the current bull market well above average duration and performance since 1949 some jitteriness is to be expected. Plus it has been nearly four years since S&P 500 started
  • Forex Trading Diary #4 – Adding a Backtesting Capability [Quant Start]

    I've been busy working on the open-source QSForex system over the past week. I've made some useful improvements and I thought I'd share them with you in this forex trading diary update. In particular, I've made the following changes, which will be discussed at length in this entry: Modification to the Position object to fix an error with how position openin
  • Implied Skew Strategy [John Orford]

    Previously, I checked whether historical skewness was a good indicator to buy and sell the S&P 500. My backtesting framework can now use the implied skew index as an indicator to buy or sell. Now, the strategy buys the S&P 500 if the implied skew index has dropped day over day and vice versa. Note that the S&P 500's implied skew is permanently nega
  • Part 2: Using a Self-Similarity Metric with Intraday Data to Define Market Regimes [CSS Analytics]

    The Self-Similarity metric has been a popular series. Recently the original post was shared on Jeff Swansons popular site System Trader Success which covers a wide variety of thought provoking articles on trading system development and is worth reading. Jeff has also posted some TradeStation code for the indicator which some readers may find valuable. In a great example of vertical blogging, a
  • Graham Value Portfolio Update [Scott’s Investments]

    In January 2012 I announced a new portfolio, a Benjamin Graham inspired value stock portfolio. The Graham portfolio is an attempt to add a value strategy to Scotts Investments, which is otherwise focused on momentum, trend, income and market timing strategies. The portfolio tracks returns for a portfolio of 15 stocks selected based on a variety of valuation metrics. The criteria used to

Quantocracy’s Daily Wrap for 04/16/2015

This is a summary of links featured on Quantocracy on Thursday, 04/16/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Optimised CRBM Code for Gaussian Units [Dekalog Blog]

    Over the last few weeks I have been working on optimising the conditional restricted boltzmann machine code, with a view to speeding it up via a C++ .oct file, and in the code box below is this .oct code for the gaussian_crbm.m code in my previous post. This gaussian_crbm.m function, plus the binary_crbm.m one, are the speed bottlenecks whilst training the crbm. In the code below I have made some
  • Does This VIX Signal Indicate Trouble Ahead? [Adam Warner]

    Time for investors to go to the mattresses (again)? This, from CNBC: "Most investors have never heard of the three-month volatility index, which is known as the VXV. But the relationship between the CBOE three-month volatility index and the options exchange's more familiar 30-day volatility index, the VIX, may signal trouble for stocks. "Like the VIX, the VXV is a measure of
  • Fed needs to walk a thin tightrope ahead of 2016… [Almanac Trader]

    One clear headwind that exists for the market is the first Fed funds rate increase since June 2006. That 0.25% rate hike nudged the target rate to 5.25% and marked the last move in a major tightening cycle that began in June 2004. Including this cycle, there have been five major Fed cycles (up and down) since 1973. A major Fed cycle is defined as the overarching Federal Reserve policy with respect
  • Social data research links: oil prices, real estate, and power laws [MKTSTK]

    Oil price volatility and oil-related events: An Internet concern study perspective [ResearchGate] This paper investigates the effects of four types of oil-related events on world oil prices, using an event study methodology and an AR-GARCH model. The Internet information concerning these events, which is derived from search query volumes in Google, is introduced in an analytical framework to ident
  • The Relationship Between CAPE and Returns [EconomPic]

    As I outlined in my previous post The Relationship Between Stocks and Bonds, the S&P 500 yields 3.7% at the current 27 CAPE (cyclically adjusted P/E), attractive from a relative basis to the sub 2% yield of the ten-year treasury. That said, a 3.7% yield is quite low by historical standards. Below is a framework for thinking about why returns should be expected to be lower AND more volatile
  • Nikkei 225 daily returns heatmap [UK Stock Market Almanac]

    This article concerns the daily returns for the Nikkei 225 from 1984. Average daily returns The following table shows the average return since 1984 of the Nikkei 225 Index for each day of the year. For example, over the last 30 years the average daily return for the Nikkei 225 on 4 January has been 0.38%. In the table, positive average daily returns are coloured green, while negative average retur
  • When VIX traders bet on a rise in volatility $SPY $VXX [@NautilusCap]

    When VIX traders bet on a rise in volatility $SPY $VXX
  • Some Seasonal Strength Could Help Today [Quantifiable Edges]

    While most people are not fond of tax day in the US, it has historically seen strong inflows into IRAs and hence the stock market. This has set up the day after tax day as a strong day for the market. Below is a look at how SPX has done since 1981 on tax day. The numbers are all impressive. They suggest a seasonal wind at the markets back today. Want research like this delivered directly to
  • A Tutorial in R on Using A Hidden Markov Model (HMM) [Inovance]

    Knowing how different market conditions affect the performance of your strategy can have a huge impact on your returns. Certain strategies will perform well in highly volatile, choppy markets while others need a strong, smooth trend or they risk long periods of drawdown. Figuring out when you should start or stop trading a strategy, adjusting your risk and money management techniques, and even set

Quantocracy’s Daily Wrap for 04/12/2015

This is a summary of links featured on Quantocracy on Sunday, 04/12/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

Quantocracy’s Daily Wrap for 04/09/2015

This is a summary of links featured on Quantocracy on Thursday, 04/09/2015. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New Book from Trader Edge: Exploiting Earnings Volatility: An Innovative New Approach to Evaluating, Optimizing, and Trading Option Strategies to Profit from Earnings Announce

    Exploiting Earnings Volatility introduces an innovative new framework for evaluating, optimizing, and trading option strategies to profit from earnings-related pricing anomalies. Leveraging his extensive background in option-pricing and decades of experience in investment management and trading, Brian Johnson developed this inventive approach specifically to design and manage option earnings strat
  • Lazy Evaluation in Finance [John Orford]

    You have the coding chops to automate your job; savvy to communicate a new easier solution to your client; or come up with that smart equation which neatly cuts through the bullshit. You're smart enough not to have to work needlessly hard. There's an idea in computer science call 'lazy evaluation' which allows your program to put its feet u
  • A Guide to Creating Your Own Smart Beta Fund [EconomPic]

    FT tries to define smart beta: Smart beta is a rather elusive term in modern finance. It lacks a strict definition and is also sometimes known as advanced beta, alternative beta or strategy indices. It can be understood as an umbrella term for rules based investment strategies that do not use the conventional market capitalisation weights that have been criticised for delivering sub-optimal return
  • Approaching Tax-Time seasonal boost $SPY [@NautilusCap]

    Approaching Tax-Time seasonal boost $SPY
  • Fast Walsh Hadamard Transform in Python [Quant at Risk]

    I felt myself a bit unsatisfied after my last post on WalshHadamard Transform and Tests for Randomness of Financial Return-Series leaving you all with a slow version of WalshHadamard Transform (WHT). Someone wise once said: in order to become a champion, you need to flight one round longer. So here I go, one more time, on WHT in Python. Please excuse me or learn from it. The choice is your
  • RUT Iron Condor – Dynamic Exit – 52 DTE – 16 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 52 days-to-expiration (DTE) Iron Condors (IC), with 16 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 options trading strate
  • Dividend Champion Portfolio April 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 for at least 25
  • Factor Relative Momentum: surprising finding on ranking [RRSP Strategy]

    A Value or Momentum portfolio is selected each month, based on the highest previous 12 month return (R). Data are from Ken Frenchs library from 1950 to 2015. I use the large momentum portfolio and small value portfolio (the HML anomaly Continue reading