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Quantocracy’s Daily Wrap for 11/26/2020

This is a summary of links featured on Quantocracy on Thursday, 11/26/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Thoughts on Crypto Market Making [Tr8dr]

    In the past have been a HFT market maker for FX and other traditional instruments, however have not investigated exchange-based market making in Crypto. As I have proprietary signals applicable for Crypto, thought it would be worthwhile to investigate the difficulty of market making on crypto exchanges. The crypto ecosystem and microstructure is quite different from FX and equities in the

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/24/2020

This is a summary of links featured on Quantocracy on Tuesday, 11/24/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Trading FX using Autoregressive Models [Robot Wealth]

    Im a big fan of Ernie Chans quant trading books: Quantitative Trading, Algorithmic Trading, and Machine Trading. There are some great insights in there, but the thing I like most is the simple but thorough treatment of various edges and the quant tools you might use to research and trade them. Ernie explicitly states that the examples in the books wont be tradable, but theyve certainly
  • Hedge Fund Battle: Discretionary vs Systematic Investing [Factor Research]

    Given alternative data, machine learning, and AI advances, systematic should beat discretionary investing However, the performance of systematic and discretionary equity market neutral hedge funds has largely been the same since 2009 Both were also correlated to the stock market, offered low returns, and featured no performance consistency INTRODUCTION Anyone who has watched the hit TV show
  • Temporal Clustering on Real Prices [Dekalog Blog]

    Having now had time to run the code shown in my previous post, Temporal Clustering, part 3, in this post I want to show the results on real prices. Firstly, I have written two functions in Octave to identify market turning points and each function takes as input an n_bar argument which determines the lookback/lookforward length along price series to determine local relative highs and lows. I ran
  • What Matters to Individual Investors? Evidence from the Horse’s Mouth [Alpha Architect]

    Finance literature is abundant with theories. As academics, we like to think these theories foster behaviors and choices by investors, which in turn translate into asset prices. To test these theories, scholars typically try to infer the validity of these assumptions by examining outcomes. The authors in this study follow a different and more direct approach: they survey a nationally

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/22/2020

This is a summary of links featured on Quantocracy on Sunday, 11/22/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Structural Change in Stock Market Valuations [Light Finance]

    In Stock Market Valuation and the 2020s in R I investigated whether the CAPE ratio could forecast the future trajectory of earnings and/or stock returns over the period 1980-2019. From this study, we made a couple of observations: The CAPE ratio cannot be used to forecast future earnings growth at a 1- or 5-year horizon The CAPE ratio only weakly explains stock returns over the next year.
  • Updating Thanksgiving Week Historical Odds [Quantifiable Edges]

    The time around Thanksgiving has shown some strong tendencies over the years both bullish and bearish. I have discussed them a number of times over the years. In the updated table below I show SPX performance results based on the day of the week around Thanksgiving. The bottom row is the Monday of Thanksgiving week. The top row is the Monday after Thanksgiving. Monday and Tuesday of
  • Estimating the positioning of trend followers [SR SV]

    There is a simple method of approximating trend follower positioning in real-time and without lag. It is based on normalized returns in liquid futures markets over plausible lookback windows, under consideration of a leverage constraint, and uses estimated assets under management as a scale factor. For optimization and out-of-sample analysis, the approach can be enhanced by sequential estimation

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/20/2020

This is a summary of links featured on Quantocracy on Friday, 11/20/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • A Primer on Survivorship Bias [Quant Rocket]

    What is survivorship bias, and why should you care about it? This post explains how survivorship bias can trick you into drawing faulty conclusions from your research, and what you need to know to avoid being tricked. What is survivorship bias? Equities datasets are said to have survivorship bias if they do not include stocks that delisted in the past due to bankrupties, mergers and acquisitions,
  • Using Quality to Seperate Good and Bad Value Stocks [Alpha Architect]

    Running a marathon is similar to being a value investor, especially in recent years where it seems more like an ultra-marathon. Both activities are painful experiences that require the ability to suffer and persist through physically and emotionally straining times. Moreover, value investors always need to worry about the perennial dogs in their portfolio, which are stocks that are cheap and

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/19/2020

This is a summary of links featured on Quantocracy on Thursday, 11/19/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Why complex models are data-hungry? [Eran Raviv]

    If you regularly read this blog then you know I am not one to jump on the AI Bandwagon, being quickly weary of anyone flashing the Its Artificial Intelligence joker card. Dont get me wrong, I understand it is a sexy term I, but to me it always feels a bit like a sales pitch. If the machine does anything (artificially) intelligent it means that the model at the back is complex,
  • Tesla’s inclusion in the S&P 500 – Is there a trade? [Robot Wealth]

    The S&P index committee recently announced that Tesla, already one of the biggest stocks listed in the country, would be included in the S&P 500. Heres the press release: Due to TSLAs size, it was widely expected to have entered the S&P 500 index much earlier but S&P has some discretionary criteria it applies to ensure that the index is an effective measure of the larger
  • Does low volatility anomaly work in funds? [Quant Dare]

    After many years there are many evidences that the low volatility anomaly works in stock markets. We have also mentioned this topic a long time ago to analysis the costs of it. This anomaly says stocks with less price variability deliver higher returns, contrary to everyones belief, which expects that return is supposed to be related to risk. In this post, we want to play and check what would

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/17/2020

This is a summary of links featured on Quantocracy on Tuesday, 11/17/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Finding Similar Stocks Via Fast GPU Based Nearest Neighbors with Faiss [Machine Learning Applied]

    There are many ways to find stocks with similar behavior based on how one defines similarity and the data used. In this article we use a 12 period channel where, for each period, we have (current adjusted close price minimum value)/(maximum value minimum value). Maximum and minimum values are computed for the adjusted close prices for the past 21 trading days (representing a trading
  • An Easy Way to Simplify and Improve the Shiller CAPE Ratio as a Prediction Tool [Alpha Architect]

    Shillers (1998) original CAPE ratio (the cyclically adjusted price of an equity index/10 year average of real earnings) used to predict long term equity returns, like every online recipe, has been improved over the years by various reviewers. A number of substitutes for real earnings have been proposed and analyzed including national income + product account earnings; revenue + cash flow; and
  • Exploring Defined Outcome ETFs [Factor Research]

    Defined outcome ETFs have quickly gathered almost $5 billion in assets Not unexpected given their much lower drawdowns when the market crashed in March 2020 However, they are complex and expensive products and there are viable alternatives INTRODUCTION If ETFs had an arch enemy, then it probably would not be mutual funds, but rather structured products. ETFs symbolize simplicity, transparency,

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/15/2020

This is a summary of links featured on Quantocracy on Sunday, 11/15/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Research Review | 13 November 2020 | Factor Investing [Capital Spectator]

    Resurrecting the Value Premium David Blitz (Robeco) and Matthias X. Hanauer (Technische Universitt Mnchen) October 15, 2020 The prolonged poor performance of the value factor has led to doubts about whether the value premium still exists. Some have noted that the observed returns still fall within statistical confidence intervals, but such arguments do not restore full confidence in the value
  • An Introduction to the NAVA Toolbox [Nava Capital]

    We decided to allow anyone to take advantage of some tools we constantly use at NAVA Capital. Investors and financial managers often need to perform similar tasks, like analyzing financial time series, comparing two investments, adjusting gross performance by management fees, performance fess and so on. Doing it in Excel is time consuming, error prone and unpractical. Doing it in Python is
  • Temporal Clustering, Part 3 [Dekalog Blog]

    Continuing on with the subject matter of my last post, in the code box below there is R code which is a straight forward refactoring of the Octave code contained in the second code box of my last post. This code is my implementation of the cross validation routine described in the paper Cluster Validation by Prediction Strength, but adapted for use in the one dimensional case. I have refactored

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/12/2020

This is a summary of links featured on Quantocracy on Thursday, 11/12/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Round about the kernel [OSM]

    In our last post, we took our analysis of rolling average pairwise correlations on the constituents of the XLI ETF one step further by applying kernel regressions to the data and comparing those results with linear regressions. Using a cross-validation approach to analyze prediction error and overfitting potential, we found that kernel regressions saw average error increase between training and
  • The Case Against Using the CAPE Ratio for Relative Valuation Across Markets [EconomPic]

    Bloomberg has an article You May Regret Staying Parked in U.S. Stocks which made the case that theres "widespread agreement" and "the answer isnt in dispute" that foreign stocks will outperform going forward. Simplified version of my view of that statement…. c'mon now. Extended version of my view of that statement is in line with what Jamie Powell outlines here: So
  • Trend Following Research: Breaking Bad Trends [Alpha Architect]

    Momentum is the tendency for assets that have performed well (poorly) in the recent past to continue to perform well (poorly) in the future, at least for a short period of time. Initial research on momentum was published by Narasimhan Jegadeesh and Sheridan Titman, authors of the 1993 study Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency. In Your
  • Free webinar series on algorithmic trading [Philipp Kahler]

    I am happy to announce that I will be hosting a free webinar series on quantitative analysis and algorithmic trading. Dates and times for the first shows can be found over here: Tradesignal Webinar Series Date and Time based patterns will be the topic of the first webinar. It will focus on the question if there are date based and time based patterns to be found in the markets. I will show some
  • Mean-Reversion Trading Strategies in Python Course [CSS Analytics]

    This post contains affiliate links. An affiliate link means CSSA may receive compensation if you make a purchase through the link, without any extra cost to you. CSSA strives to promote only products and services which provide value to my business and those which I believe could help you, the reader. In the last post I interviewed Dr. Ernest Chan who is the author of the Mean-Reversion Trading

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/10/2020

This is a summary of links featured on Quantocracy on Tuesday, 11/10/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • An Interview with Dr. Ernest Chan (@ChanEP) [CSS Analytics]

    In the last post I reviewed the Momentum Trading Strategies Course by Quantra (a division of QuantInsti) which I reviewed as part of a recent educational journey to improve my quantitative skill set. The next course that I will be reviewing is Mean-Reversion Strategies in Python which is taught by Dr. Ernest Chan. I have personally read Ernies book Machine Trading which is very well
  • Podcast: The Magic of Momentum Trading Alan Clement of @HelixTrader [Better System Trader]

    Ive been sitting here for 5 mins trying to come up with a witty intro for this episode about momentum, but I just couldnt seem to get it going, so
  • Where does FX sit in a Systematic Trading Portfolio? [Robot Wealth]

    This post is a BONUS LESSON taken directly from Zero to Robot Master Bootcamp. In this Bootcamp, we teach traders how to research, build and trade a portfolio of 3 strategies including an Intraday FX Strategy, a Risk Premia Strategy and a Volatility Basis Strategy. If youre interested in adding strategies to your portfolio or are just keen to start on the path to becoming a successful and
  • One Look At Monday s Massive Rotation [Quantifiable Edges]

    Monday saw a massive market rotation. It could be noted by the performance in the IWM vs the QQQ, or in looking at performance among S&P 500 sectors, where Energy beat Technology by 15% on Monday. But to really see how strong the rotation was, youd need to take a look at individual stock performance within the SPX. Below is a list of the Top 10 S&P 500 stocks, ranked by YTD performance
  • Do Analysts Exploit Factor Anomalies when recommending stocks? [Alpha Architect]

    Do analysts actively exploit anomalies when they recommend stocks? Do analysts research efforts contribute to efficiency in the equity markets? Good questions. This research clarifies the relationship between established stock return anomalies and analyst recommendations. Given that anomalies are so well-documented and so well-known, and if analysts are sophisticated informed and
  • A Temporal Clustering Function, Part 2 [Dekalog Blog]

    Further to my previous post, below is an extended version of the "blurred_maxshift_1d_linear" function. This updated version has two extra outputs: a vector of the cluster centre index ix values and a vector the same length as the input data with the cluster centres to which each datum has been assigned. These changes have necessitated some extensive re-writing of the function to include

Filed Under: Daily Wraps

Quantocracy’s Daily Wrap for 11/09/2020

This is a summary of links featured on Quantocracy on Monday, 11/09/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • New @Robot_Wealth Bootcamp Open! Self-Paced Algo Trading Course Taught by Pro Traders

    Successful trading is HARD. And most approaches we've seen suck, quite frankly. In this Bootcamp, you'll learn a high-probability approach to trading which is simple and systematic. The path to sustainable trading profits is straight and narrow. Bootcamp keeps you on that path. In this Bootcamp, we'll take you step-by-step through the process of setting up your systematic trading
  • Market Neutral Funds: Powered by Beta? [Factor Research]

    The long-term track record of equity market neutral hedge funds is attractive, but should be viewed with scepticism due to Madoff and survivorship bias Only one index from HFRX seems sound, but his highlights negative alpha since the GFC and positive returns primarily from market beta A factor exposure analysis reveals unusual factor loadings INTRODUCTION The mutual fund selection process would be
  • SPX Performance After Big Weekly Reversals [Quantifiable Edges]

    After losing 5.6% this in the week ending 10/30/20, the S&P 500 completely reversed the losses this past week with a 7.3% gain. That is a fairly remarkable turnaround. Below is a look at all other times the S&P 500 lost 5% or more one week, and then made up for the losses and more the next week.
  • Forecasting energy markets with macro data [SR SV]

    Recent academic papers illustrate how macroeconomic data support predictions of energy market flows and prices. Valid macro indicators include shipping costs, industrial production measures, non-energy industrial commodity prices, transportation data, weather data, financial conditions indices, and geopolitical uncertainty measures. Good practices include a focus on small models and a

Filed Under: Daily Wraps

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