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Quantocracy’s Daily Wrap for 05/03/2021

This is a summary of links featured on Quantocracy on Monday, 05/03/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Quant Minds Online Virtual Conference, May 24-28. Save 10% with this link. [Quant Minds]

    Mid-year learning and knowledge sharing for the quant finance community A week of 5 precision-engineered digital summits, laser-focused on the most innovative research. Choose the days that matter to you. Meet the quants finding solutions to the same problems you face.
  • 60/40 Portfolios Without Bonds [Factor Research]

    Bonds have become less useful in asset allocation given low to negative expected returns Liquid alternative strategies can be used to replace bonds From a historic perspective, long volatility strategies would have been especially attractive INTRODUCTION John Maynard Keynes famously asked, when the facts change, I change my mind what do you do, sir?. If this question was directed at
  • Macro information waste and the quantamental solution [SR SV]

    Financial markets are not macro information efficient. This means that investment decisions miss out on ample relevant macroeconomic data and facts. Information goes to waste due to research costs, trading restrictions, and external effects. Evidence of macro information inefficiency includes sluggishness of position changes, the popularity of simple investment rules, and the prevalence of

Quantocracy’s Daily Wrap for 05/01/2021

This is a summary of links featured on Quantocracy on Saturday, 05/01/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Market Timing Using Aggregate Equity Allocation Signals [Alpha Architect]

    When it comes to predicting long-term equity returns, several well-known indicators come to mindfor example, the CAPE ratio, Tobins Q, and Market Cap to GDP, to name a few. Yet there is another indicator without nearly as high of a profile that has outperformed the aforementioned indicators significantly when it comes to both forecasting and tactical asset allocation. That indicator, known
  • Research Review | 30 April 2021 | Interest Rates & Yield Curves [Capital Spectator]

    Forecasting Bond Risk Premia using Stationary Yield Factors Tobias Hoogteijling (Robeco Asset Management), et al. April 12, 2021 The standard way to summarize the yield curve is to use the first three principal components of the yield curve, resulting in level, slope and curvature factors. Yields, however, are non-stationary. We analyze the first three principal components of yield changes, which

Quantocracy’s Daily Wrap for 04/28/2021

This is a summary of links featured on Quantocracy on Wednesday, 04/28/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Copula for Statistical Arbitrage: Stocks Selection [Hudson and Thames]

    This is the fifth article of the copula-based statistical arbitrage series. You can read the previous four articles with the first three focusing on pairs-trading: Copula for Pairs Trading: A Detailed, But Practical Introduction. Copula for Pairs Trading: Sampling and Fitting to Data. Copula for Pairs Trading: A Unified Overview of Common Strategies. Copula for Statistical Arbitrage: A Practical
  • Reducing data dimensionality using PCA [Quant Dare]

    One common problem when looking at financial data is the enormous number of dimensions we have to deal with. For instance, if we are looking at data from the S&P 500 index, we will have around 500 dimensions to work with! If we have enough computing power, we will be able to process so much data, but that will not always be the case. Sometimes, we need to reduce the dimensionality of the

Quantocracy’s Daily Wrap for 04/27/2021

This is a summary of links featured on Quantocracy on Tuesday, 04/27/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New Site: GANs and Synthetic Market Data (h/t @thodoha) [Mark Best]

    I have been thinking a lot about risk lately. The liquidity injections from the FED are pushing risk assets higher and higher. There seem to be bubbles in nearly every speculative assets. The main concern long term would be rising rates at the same time as a falling dollar suggesting there is no longer a market for US debt. Recently however rates have been rising which is causing concern that the
  • Learning the Exit (part 2) [Tr8dr]

    As described in my prior post Learning the Exit (part 1), I have a model that indicates mean reversion entries with ~81% accuracy, however I did not have a good approach in handling the exit. While 81% of MR signals had a minimum profit of 25% (of prior amplitude), the mean profit available was 150%, pointing to a larger profit opportunity to be had if can better handle the exit. I have found it

Quantocracy’s Daily Wrap for 04/26/2021

This is a summary of links featured on Quantocracy on Monday, 04/26/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Factor Investing: The Truth Has Many Shades [Factor Research]

    The data from Professor French has laid the foundation for factor investing However, over time factor portfolio construction grew complex and with many nuances Returns may look more or less attractive, which makes a weak foundation INTRODUCTION When I was growing up one of my favourite TV shows was The X-Files, which followed the lives of FBI Special Agents Fox Mulder (David Duchovny) and Dana
  • Top rated contributor @Robot_Wealth teaches you how to trade part-time like a quant. Enroll til Friday.

    How do you make money trading in the highest probability, most effective way? Most trading advice does not address this question seriously enough. Either it smothers you in meaningless platitudes (don't fight the trend, don't risk more than 2% of your account on any trade), or it misses the mark in the other direction – being something that only a full-time professional trader and coding
  • Building a Zipline bundle for Yahoo CSV files [Quant Insti]

    Zipline is a fantastic tool for backtesting and data is the main raw material for doing this kind of analysis. In this post, we are going to focus on how to load our own data files. Through an example, we will create a bundle to load data from csv files downloaded from Yahoo finance.
  • Building a Better q-Factor Asset Pricing Model [Alpha Architect]

    Since the development of the first asset pricing model, the Capital Asset Pricing Model (CAPM), academic research has attempted to develop models that increase the explanatory power of the cross-section of stock returns. We moved from the single-factor CAPM (market beta), to the three-factor Fama-French model (adding size and value), to the Carhart four-factor model (adding momentum), to Hou, Xue,

Quantocracy’s Daily Wrap for 04/20/2021

This is a summary of links featured on Quantocracy on Tuesday, 04/20/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Market Sentiment and an Overnight Anomaly [Quantpedia]

    Various research papers show that market sentiment, also called investor sentiment, plays a role in market returns. Market sentiment refers to the general mood on the financial markets and investors overall tendency to trade. The mood on the market is divided into two main types, bullish and bearish. Naturally, rising prices indicate bullish sentiment. On the other hand, falling prices indicate
  • Climate Change and Asset Allocation [Alpha Architect]

    This article focuses on climate-aware asset allocation and the associated impacts of higher temperatures on equity excess returns and risk. The objective of this research is to demonstrate how portfolios can incorporate climate change risk and rewards into the decision-making process. The research does not comment The analysis proceeds in two steps: Determine estimates of how climate change

Quantocracy’s Daily Wrap for 04/19/2021

This is a summary of links featured on Quantocracy on Monday, 04/19/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New Site: Machine learning for finance – part 2 [Thiago Marzagao]

    In this series of posts Im trying some of the ideas in the book Advances in Financial Machine Learning, by Marcos Lpez de Prado. Here I tackle an idea from chapter 5: fractional differencing. the problem Stock prices are nonstationary – their means and variances change systematically over time. Take for instance the price of BOVA11 (an ETF that tracks Brazils main stock market index,
  • Myth-Busting: Money Printing Must Create Inflation [Factor Research]

    The link between central bank policy, money supply, and inflation seems to have changed QE money printing had no substantial impact on inflation, aside from asset price inflation More direct stimuli might change that INTRODUCTION London ranks ninth on the UBS Global Real Estate Bubble index for residential properties. Like in many other countries, property prices in the United Kingdom reached an
  • Statistical arbitrage risk premium [SR SV]

    Any asset can use a portfolio of similar assets to hedge against its factor exposure. The factor residual risk of the hedged position is called statistical arbitrage risk. Consequently, the statistical arbitrage risk premium is the expected return of such a hedged position. A recent paper shows that both theoretically and empirically this premium rises in the stocks statistical arbitrage risk.

Quantocracy’s Daily Wrap for 04/18/2021

This is a summary of links featured on Quantocracy on Sunday, 04/18/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Beta in the tails [Eran Raviv]

    Every form of strength is also a form of weakness*. I love statistics, but I focus to much on methodology, which is not for everyone. Some people (right or wrong) question: wonderful sir, but what can I do with it?. A new paper titled Beta in the tails is a showcase application for why we should focus on correlation structure rather than on average correlation. They discuss the
  • The Price Wave Radio [Financial Hacker]

    Price curves consist of much noise and little signal. For separating the latter from the former, John Ehlers proposed in the Stocks&Commodities May 2021 issue an unusual approach: Treat the price curve like a radio wave. Apply AM and FM demodulating technology for separating trade signals from the underlying noise. A very simple AM (amplitude modulation) receiver is just an antenna, a

Quantocracy’s Daily Wrap for 04/16/2021

This is a summary of links featured on Quantocracy on Friday, 04/16/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • How Portfolio Construction Impacts the Reliability of Outcomes [Alpha Architect]

    We are proponents of focused (i.e., 50 stock) long-only value and momentum factor strategies. 1 There are also plenty of incredibly talented systematic investing shops that build highly diversified factor portfolios with 500+ stocks. We take no stance on the "best" approach because there is no "best" approach: the reality is that each approach has costs and benefits. Our belief
  • How to Predict Asset Prices (and how not to) [Robot Wealth]

    If you have some factor that you think predicts future stock returns (or similar) and you are making charts like below, then here are some tips Well go through an example of trying to time SPX with the level of VIX. You get daily SPX index prices and daily VIX close data You align them by date and plot them on dual axes, in true RealVision style. SPX tends to go down when VIX is
  • Inflation and the Value Premium [Alpha Architect]

    The grand experiment of combining massive fiscal and monetary stimulus at a time when the economy is already recovering stronglythe Feds latest forecast for 2021 GNP growth is 6.5 percenthas led many investors to begin to worry about the risks of rising inflation. And strong growth is expected to continue well into next year. For example, the Philadelphia Federal Reserve First Quarter

Quantocracy’s Daily Wrap for 04/14/2021

This is a summary of links featured on Quantocracy on Wednesday, 04/14/2021. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Copula for Statistical Arbitrage: Intro to Vine Copula [Hudson and Thames]

    Copula is a great statistical tool to study the relation among multiple random variables: By focusing on the joint cumulative density of quantiles of marginals, we can bypass the idiosyncratic features of marginal distributions and directly look at how they are related. Indeed, traders and analysts have been using copula to exploit statistical arbitrage under the pairs trading framework for
  • A self optimising moving average [Philipp Kahler]

    Different markets and different timeframes will need different moving average periods. This article will show a way to construct a self optimising moving average, one which automatically adjusts its period to the charted market and timeframe. Reading a simple moving average I would like to start this new indicator with some thoughts about how to define how good a moving average is. Usually
  • What cannot be hedged [Quant Dare]

    When looking to generate appreciable returns and increase diversification, it is natural to consider investing in foreign instruments. Currency risk then comes up, since the returns coming from these funds, stocks, bonds need to be translated into your home currency. The most straightforward solution to deal with this undesired extra risk is to hedge. In this context, the main objective of
  • The Fibonacci Timing Pattern – Coding a Reversal Pattern to Trade the Markets [Milton FMR]

    I am always fascinated by patterns as I believe that our world contains some predictable outcomes even though it is extremely difficult to extract signals from noise, but all we can do to face the future is to be prepared, and what is preparing really about? It is anticipating (forecasting) the probable scenarios so that we are ready when they arrive. Pattern recognition is the search and