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Quantocracy’s Daily Wrap for 08/31/2020

This is a summary of links featured on Quantocracy on Monday, 08/31/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Effects of Portfolio Construction on the Performance of Style Factor ETFs [Alpha Architect]

    Every once in a while its effective to challenge the deep-seated ideas that have been utilized to construct your portfolio. Here at Alpha Architect continuously study the literature and conduct research to derive what we believe gives investors the best shot at winning over the long-haul. This article challenges our preference for the equal-weight methodology, which ensures base-line
  • Picking Profitable Businesses Can Be Highly Unprofitable [Factor Research]

    There seems to be a relationship between the Profitability factor and interest rates The most profitable stocks outperformed the least profitable ones when market cap-weighted However, when equal-weighted, the least profitable stocks outperformed INTRODUCTION The gap between theory and reality in finance is sometimes fuzzy, at other times crystal clear. Ask an academic what explains stock returns
  • Research Review | 28 August 2020 | Portfolio Strategy [Capital Spectator]

    Fire Sale Risk and Expected Stock Returns George O. Aragon (Arizona State U.) and Min S. Kim (Michigan State U.) July 29, 2020 We measure a stocks exposure to fire sale risk through its ownership links to equity mutual funds that experience outflows during periods of systematic outflows from the fund industry. We find that more exposed stocks earn higher average returns: a portfolio that buys

Quantocracy’s Daily Wrap for 08/27/2020

This is a summary of links featured on Quantocracy on Thursday, 08/27/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Pre-Election Drift – Video [Quantpedia]

    The presidential campaign is becoming hotter as we are moving closer to this years election. But we still have enough time to dig deeper into data about the past elections and prepare for the autumn. Therefore, we have prepared a short video recapitulation of our paper on the pre-election drift. Are you looking for more strategies to read about? Check http://quantpedia.com/Screener Do you want
  • How to Measure and Understand Portfolio Tail Risk Events [Alpha Architect]

    To any investor that has had the opportunity to experience a large collapse in the market, they can tell you that essentially there is nowhere to hide. Correlations of assets that were held to diversify a portfolio suddenly get very correlated in extreme market conditions aka the tails of the distribution. Much academic research has been done on the stronger dependence 1 that prevails among

Quantocracy’s Daily Wrap for 08/26/2020

This is a summary of links featured on Quantocracy on Wednesday, 08/26/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Satisficing and optimizing [OSM]

    In our last post, we explored mean-variance optimization (MVO) and finally reached the efficient frontier. In the process, we found that different return estimates yielded different frontiers both retrospectively and prospectively. We also introduced the concept of satsificing, originally developed by Herbert Simon. Simply put, satisficing is choosing the best available solution afforded by a

Quantocracy’s Daily Wrap for 08/25/2020

This is a summary of links featured on Quantocracy on Tuesday, 08/25/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Sigma Algebras and Probability Spaces [Quant Start]

    Our recent 2020 Content Survey highlighted the desire from many of you to study the more advanced mathematics necessary for carrying out applications in quantitative finance. Two of the highlighted areas were Linear Algebra for Deep Learning along with Stochastic Calculus. The latter is the underlying theoretical framework utilised for pricing derivatives contracts. Learning Stochastic Calculus

Quantocracy’s Daily Wrap for 08/24/2020

This is a summary of links featured on Quantocracy on Monday, 08/24/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Risk-Neutral Probability Distributions: CLK2020 [Quantoisseur]

    Risk-neutral probability distributions (RND) are used to compute the fair value of an asset as a discounted conditional expectation of its future payoff. In 1978, Breeden and Litzenberger presented a method to derive this distribution for an underlying asset from observable option prices [1]. The derivation of the relationship is well presented in A Simple and Reliable Way to Compute Option-Based
  • Does Gold do What it is Supposed to do? [Alpha Architect]

    The world has unquestionably be sent on a wild ride in 2020. We entered the year full of optimism and hope. Markets were at or near all-time highs, unemployment was low, living on easy street was good. Then the impact of COVID-19 ripped through the market and the economy with enough force to make the winds of even a double hurricane green with envy. This massive and rapid readjustment of the
  • Training the Perceptron with Scikit-Learn and TensorFlow [Quant Start]

    In the previous article on the topic of artificial neural networks we introduced the concept of the perceptron. We demonstrated that the perceptron was capable of classifying input data via a linear decision boundary. However we postponed a discussion on how to calculate the parameters that govern this linear decision boundary. Determining these parameters by means of 'training' the
  • How Risky Are Value Stocks? [Factor Research]

    The Value factor is often explained as representing a risk premium or a behavioral bias However, financial analysts regard cheap stocks as less risky than expensive ones Data shows that expensive stocks were riskier than cheap ones, which challenges the risk premium theory INTRODUCTION Which of the following two portfolios comprised of US stocks would you consider riskier? Portfolio A: Amazon,
  • Market-implied macro shocks [SR SV]

    Combinations of equity returns and yield-curve changes can be used to classify market-implied underlying macro news. The methodology is structural vector autoregression. Theoretical restrictions on unexpected changes to this multivariate linear model allow identifying economically interpretable shocks. In particular, one can distinguish news on growth, monetary policy, common risk premia and

Quantocracy’s Daily Wrap for 08/21/2020

This is a summary of links featured on Quantocracy on Friday, 08/21/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Petra on Programming: Four Dimensions of Strength [Financial Hacker]

    In the S&C September 2020 article Tracking Relative Strength In Four Dimensions, James Garofallou presents a metric for evaluating a securitys strength relative to 11 major market sectors and over several time periods. All this information is squeezed into a single value. Maybe at cost of losing other important information? In this article well look into how to program such a
  • Even Great Investments Experience Massive Drawdowns [Alpha Architect]

    Editors Note: The ability of value investors to adhere to their investment strategy has been put to the greatest test ever. From January 2017 through March 2020, in terms of total returns, the Russell 3000 Growth Index outperformed the Russell 3000 Value Index by 51.7 percentage points (46.7% vs. -5.0%). That drawdown was much greater than previous ones and has lasted longer. For frequent

Quantocracy’s Daily Wrap for 08/19/2020

This is a summary of links featured on Quantocracy on Wednesday, 08/19/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Multi-Asset Skewness Trading Strategy [Quantpedia]

    Our main goal in Quantpedia is to broaden the horizons of our readers in the field of systematic investing and quantitative trading. We do not aim to sell trading signals but to inspire and give fresh ideas, of how to invest limited time and resources on quantitative research. Clients can adopt trading strategy ideas derived out of academic research or further adapt them to their needs and

Quantocracy’s Daily Wrap for 08/18/2020

This is a summary of links featured on Quantocracy on Tuesday, 08/18/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • A Neural Network based trading strategy [Philipp Kahler]

    I always dreamed about the machine which tells me to enter long right before the market starts to go up. Might a neural network be this machine? Using Tradesignal and the free Python Neural Net library Pyrenn it is easy to find out Part one: Classification of data The first step in the process is to tell the Neural Network when it should give me a go. Therefore I designed me small indicator
  • Value Investing: An Examination of the 1,000 Largest Firms [Alpha Architect]

    Among stock investors, a common strategy/belief held is Value investing buying stocks that are relative cheaper on price/fundamental ratios. The idea behind why value investing works is that Value stocks are either (1) riskier and/or (2) have been mispriced by the market. In theory, these elements of risk/mispricing lead to expected above-market returns. However, this strategy has failed over
  • Bank Risk Premia Indices: Unbankable? [Factor Research]

    Factor investing can be pursued across asset classes Risk premia products sold by investment banks have generated mostly unattractive returns since 2006 The idea of risk premia indices is great, but the implementation has been poor INTRODUCTION Monoculture can be considered the biggest threat to our food supply and therefore our livelihood. Although our diet may seem varied, about 20 species of

Quantocracy’s Daily Wrap for 08/17/2020

This is a summary of links featured on Quantocracy on Monday, 08/17/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • EDGAR timestamps [Regressionist]

    I need precise timestamp in order to study the market reaction to news. Sadly, the SEC has not joined the exchanges in providing nanosecond timestamps from GPS-synced rubidium atomic clocks. Rather, it looks like the best EDGAR timestamps I can get from the SEC are only accurate within a couple of minutes. Here are three ways to get the timestamps: Filing header XML Oldloads archives

Quantocracy’s Daily Wrap for 08/16/2020

This is a summary of links featured on Quantocracy on Sunday, 08/16/2020. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Feature Selection (3 / 3) [Tr8dr]

    In the prior two posts, investigated: Subspace Projections: feature selection (1/3) Information Geometric: feature selection (2/3) In this post will evaluate feature importance as implemented by Random Forest and compare to Information Geometric approaches. Here is an outline of what would like to discuss: similarities between Decision Trees and Information Geometric approaches for feature
  • Candlestick Pattern Scanner Functions [Dekalog Blog]

    Since my last currency strength candlestick chart post it seemed to make sense to be able to scan said charts for signals, so below is the code for two Octave functions which act as candlestick pattern scanners. The code is fully vectorised and self-contained, and on my machine they can scan more than 300,000 OHLC bars for 27/29 separate patterns in less than 0.5 seconds. Both functions have a