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Quantocracy’s Daily Wrap for 10/01/2021

This is a summary of links featured on Quantocracy on Friday, 10/01/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Mr Greedy and the Tale of the Minimum Tracking Error Variance [Investment Idiocy]

    This is the sixth (!) post in a (loosely defined) series about finding the best way to trade futures with a relatively small account size. This first (old) post, which wasn't conciously part of a series, uses an 'ugly hack': a non linear rescaling of forecasts such that we only take positions for relatively large forecast size. This is the method I was using for many years. These
  • Value Investing and Intangibles [Alpha Architect]

    Recent research, including the 2020 studies Explaining the Recent Failure of Value Investing and Intangible Capital and the Value Factor: Has Your Value Definition Just Expired?, have investigated the impact on U.S. value strategies of the increase in the relative importance of intangible assets compared to physical assets. An interesting take on the rise of intangibles is Kai Wus

Quantocracy’s Daily Wrap for 09/29/2021

This is a summary of links featured on Quantocracy on Wednesday, 09/29/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Multi-day Limits for Mean Reversion [Alvarez Quant Trading]

    A reader recently suggested leaving the limit orders for a mean reversion trade on for a couple of days. Typically, these orders are good only for one day unless the stock sets up again. I did not think that this would help but as I always tell my consulting clients when they ask me if an idea will work or not, I am always surprised but what works and what doesnt, so I test everything and
  • Introduction to Clustering Methods In Portfolio Management Part 3 [Quantpedia]

    This is the third and final article from the clustering series. If youve missed the previous parts, here you can find the first and second parts of the series. This section examines trading strategies based on previously introduced clustering methods. The complete Portfolio Clustering report will be available for our Quantpedia Pro clients next week. Cluster Risk Parity Strategies In one of the

Quantocracy’s Daily Wrap for 09/27/2021

This is a summary of links featured on Quantocracy on Monday, 09/27/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Efficient Long Duration Treasury Investing [Simplify]

    The shape of the US Treasury curve over the past five decades has provided investors with the opportunity to create more efficient long duration exposure than simply buying long-dated Treasuries. In this article we will show how the most efficient long duration exposure is often generated by levering a point in the middle of the Treasury curve. This technique maximizes the attractive coupons, roll
  • Asset Pricing Models in China [Quantpedia]

    The CAPM model was a breakthrough for asset pricing, but the times where the market factor was most widely used are long gone. Nowadays, if we exaggerate a bit, we have as many factors as we want. Therefore, it might not be straightforward which factor model should be used. Hanauer et al. (2021) provide several insights into factor models. The authors postulate that the factor models should be
  • Macro risks and the term structure of interest rates [Alpha Architect]

    The authors of this paper identify aggregate supply and aggregate demand shocks for the US economy utilizing macroeconomic data on inflation, real GDP growth, core inflation, and the unemployment gap. They then go on to extract how these shocks to supply and demand impact the term structure of interest rates. This paper investigates two main research questions: Is it possible to use non-Gaussian
  • This Time It s Different!? [Factor Research]

    Options trading has increased to record highs Some data points indicate changes in the market structure However, these changes are likely temporary rather than structural INTRODUCTION During the 1954 recession in the U.S., Sir John Templeton wrote to his clients that this time its different are the four most dangerous words in investing. A pedantic reader might comment that its
  • How Random is the Market? Testing the Random Walk Hypothesis [Raposa Trade]

    A mainstay of academic research into the market is the Random Walk Hypothesis (RWH). This is the idea that market moves are random and follow a normal distribution that can be easily described using a concept borrowed from physics called Brownian Motion. This makes the market mathematics manageable, but is it true? Is the market really random? If it is, then theres little point to trying to

Quantocracy’s Daily Wrap for 09/25/2021

This is a summary of links featured on Quantocracy on Saturday, 09/25/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Podcast Interview with Grzegorz Link [System Trader Show]

    Todays guest is Grzegorz Link, who professionally works as a quant for an investment fund. Grzegorz is a physicist by education, which may surprise some. However, the thing is that in building market models, skills such as programming and mathematics are the primary tools, which is the same for contemporary physicists. We raise many interesting issues during the conversation, trying to answer
  • Crowding and Factor Premiums [Alpha Architect]

    My March 23, 2021, article for Alpha Architect addressed the issue that in recent years the field of empirical finance has faced challenges from papers arguing that there is a replication crisis because the majority of studies cannot be replicated and/or their findings are the result of multiple testing of too many factors. However, the finding that factor premium returns cannot be replicated

Quantocracy’s Daily Wrap for 09/23/2021

This is a summary of links featured on Quantocracy on Thursday, 09/23/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New Site! Trailing Stops in Various AutoCorrelation and Volatility Regimes [Derek Wong]

    Abstract: I examine trailing stops in real markets and various autocorrelation and volatility regimes using synthetic data. Exits are notoriously under-studied and may be a source of edge. I examine three key hypotheses using my take on Tom Bassos random entry method to remove entry from the equation. Disclaimer: Not financial advice, only my own opinions. This is not to encourage nor promote

Quantocracy’s Daily Wrap for 09/22/2021

This is a summary of links featured on Quantocracy on Wednesday, 09/22/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Steal ideas, not implementations [Robot Wealth]

    Imagine youre a relatively small, independent trader trying to turn trading from a hobby into a serious business. If thats you, then there are a few concepts that will help you pick the right trades to get after. This is important because picking the right trades is most of the game. First, the Market Gods give no prizes for difficulty. So, to start with, youll want to play the easiest,
  • Getting serious about part-time trading w/ @Robot_Wealth [Better System Trader]

    Kris Longmore from RobotWealth joins us to discuss 4 key areas part-time traders need to take seriously to be successful, including: Why its important to understanding market participants and why theyre trading, 3 common things traders do that almost guarantee they will blow up, Setting realistic expectations for retail traders, The edge pyramid and where retail traders should target,
  • Factor contribution [Quant Dare]

    In this post we are going to examine two alternative methods of calculating the factor contribution to the performance of an equity portfolio. To evaluate the performance of an equity portfolio regarding the exposure to risk factors, it is common to calculate the contribution of each factor to the performance. When we use the term contribution we are speaking about the absolute return of something

Quantocracy’s Daily Wrap for 09/21/2021

This is a summary of links featured on Quantocracy on Tuesday, 09/21/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Look-Ahead Bias, and Why Backtests Overpromise [Enjine]

    The Korean drama Sisyphus is a story about a couple of heroes who struggle against a villain from the future. Villains need deep pockets to pull off large schemes, and in Sisyphus case, the villain amasses his wealth by using his knowledge of the future to make money on the stock market. In one scene, he is seen taking a massive short position on the stock market on the eve of September
  • Monday s Strong Selling & New Lows Triggered This Historically Bullish Setup [Quantifiable Edges]

    Many studies identified by the Quantifnder Monday afternoon showed the strong selling and closing lows to be potentially bullish. And Turnaround Tuesday is typically the best day for a bounce to begin. The study below considered the long-term uptrend, intermediate-term low, and strong selling on Monday. SPX big drop to a low clos on a Monday has led to consistent bounces during uptrends. The only
  • ESG Ratings are Noisy. Buyer Beware [Alpha Architect]

    ESG products have been flooding the market and it is difficult for investors to assess the ground truth. To make matters worse, with limited sample size periods and datasets, trying to determine evidence-based ESG insights, is challenging. Nonetheless, weve been covering the academic research on ESG investing as much as we can to empower investors through education. What weve found is

Quantocracy’s Daily Wrap for 09/20/2021

This is a summary of links featured on Quantocracy on Monday, 09/20/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Researcher Motives [CXO Advisory]

    Do motives of financial market researchers justify strong skepticism of their findings? In his brief August 2021 paper entitled Be Skeptical of Asset Management Research, Campbell Harvey argues that economic incentives undermine belief in findings of both academic and practitioner financial market researchers. Based on his 35 years as an academic, advisor to asset management companies and
  • Are Stock Markets Becoming More Correlated? [Factor Research]

    The correlation of stock markets has stopped increasing since the GFC The Value and Momentum factors are trading at peak correlations Correlations can change dramatically when using different data sources INTRODUCTION Globalization is less of a smooth ride on a river barge and more akin to river rafting. There might be calm stretches with glorious mountain views, but also rapids and waterfalls.
  • Research Review | 17 Sep 2021 | Financial Shocks And Crises [Capital Spectator]

    We present a new database of banking-crisis interventions since the 13th century. The database includes 1886 interventions in 20 categories across 138 countries, covering interventions during all of the crises identified in the main banking-crisis chronologies, while also cataloguing a large number of interventions outside of those crises. The data show a gradual shift over the past centuries from

Quantocracy’s Daily Wrap for 09/16/2021

This is a summary of links featured on Quantocracy on Thursday, 09/16/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Introduction to Clustering Methods In Portfolio Management – Part 1 [Quantpedia]

    At the beginning of October, we plan to introduce for our Quantpedia Pro clients a new Quantpedia Pro report dedicated to clustering methods in portfolio management. The theory behind this report is more extensive; therefore, we have decided to split the introduction into our methodology into three parts. We will publish them in the next few weeks before we officially unveil our reporting tool.
  • Is Currency Momentum Factor Momentum? [Alpha Architect]

    A large body of evidence, including the studies Is There Momentum in Factor Premia? Evidence from International Equity Markets, Factor Momentum Everywhere (Summary) and Factor Momentum and the Momentum Factor, has demonstrated that momentum exists across financial markets (stocks, bonds, commodities, and currencies) and around the globe and that both cross-sectional (relative) and

Quantocracy’s Daily Wrap for 09/15/2021

This is a summary of links featured on Quantocracy on Wednesday, 09/15/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Netting income [OSM]

    For fundamental equity investors, the financial statement is the launchpad for the search for value. True, quants use financial statements too. But they spend less time on what the numbers mean, than on what they are. To produce a financial statement that adequately captures the economic (not GAAP or IFRS) position of a company is no mean feet and draws upon accounting, domain knowledge, and