We are huge believers in value investing. I personally started off as a fundamental value guy, spending twenty-plus years trying to pick stocks. I eventually ran into Wes, who convinced me that a systematic approach to value investing was the way to go. Wes, as many of you are probably aware,

I have written a couple of articles recently about “Good Days in Bonds.” One period of note is the last 5 tradng days of the month. In the articles I brushed with a broad stroke – to avoid exceeding a certain level of curve-fitting – including all 12 months. For the record though, FYI, not

In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 12 delta short strikes, with different profit and loss exits. This is a non-directional options trading strategy that seeks to profit from a market that

Following on from the successful C++ .oct coding of the Gaussian and Binary units, I thought I would conduct a simple visual test of the conditional restricted boltzmann machine, both as a test of the algorithm itself and of my coding of the .oct functions. For this I selected a

Frequent readers of this blog know that I am somewhat obsessed with the concept of timing luck and portfolio tranching, with the ultimate goal of reducing the variance of active returns. For those less familiar with the topic, you can read our introductory white paper here. I recently wrote a more

We have mentioned the put/call ratio of open interest on S&P 100 (OEX) options a handful of times over the past 6 months or so. The reason is that this historically “smart money” indicator has been flashing warning signs off and on during that period. On March 3, we posted our most recent

On an open to close basis, Thursdays have been on real hot streak over the last 6 months. This can be seen in the stats table below. The numbers here are all impressive. Traders could be looking at some intraday strength on Thursday based on this. Of course we are looking at a pretty narrow period

Quick Summary For a bond momentum strategy, it makes sense to select the top 3 or top 6 funds. The starting universe matters. One must consider the taxes and transaction costs associated with the strategy, which can be significant. Background Proponents of the momentum investing philosophy suggest

Financials relative strength at multi-year lows... $XLF $SPY

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC), with 8 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs

Gary Antonacci, author of the award-winning book Dual Momentum Investing, explains the merits of a momentum-based approach to investing and also discusses the importance of indexing and investment costs.

Yesterday I published some important changes to the QSForex software. These changes have increased the usefulness of the system significantly to the point where it is nearly ready for multi-day tick-data backtesting over a range of currency pairs. The following changes have been posted to Github:

In the ETF world, average bid/ask spread is one of the most widely quoted metrics for liquidity. And average bid/ask spread is indeed important when evaluating ETFs. The chart below shows the average bid/ask spread (in bps of closing price) for each of the sixteen ETFs that we use in our Multi-Asset

Here's an overview of my new Lazy Backtesting tool. Yes I have the flu, but no, that's not too far away from how I usually talk. Still a few missing features, but it's not a bad return for a few hours work. Let me know what you think, john.orford@gmail.com.

A couple of late reporting funds this month, but here is the update for March’s Wizards performance. A fairly positive month to increase the yearly gains. Organisation / Fund Return YTD * AUM ** Abraham Trading1 1.26% 5.00% $275M Altis Partners2 5.95% 10.42% $325M Aspect Capital3 3.70% 7.99%

We have spent quite a bit of ink in this blog recently covering various aspects, and potential implications of the ongoing range in the U.S. stock market. As students of the market, we attempt to observe, identify and (hopefully) accurately interpret what is happening in the markets. And currently

My initial goal of this post was to share why risk parity was less likely to be a free lunch on a forward basis using data going back to the 1950's (the last time we saw rates at current levels), but it became more of a risk parity 101 piece. I'll save much of those comments for another

In this post we will look at the backtest results for dynamic exits of the 66 days-to-expiration (DTE) Iron Condor (IC) options strategy, with 8 delta short strikes, with different profit and loss exits. This is a non-directional options trading strategy that seeks to profit from a market that stays

Cesar Alvarez spent nine years as a professional market researcher for Connors Research and TradingMarkets.com. He has been at the forefront of stock market research, having developed a number of successful trading systems now used by numerous investors and fund managers in the United States and

At this stage in our lives we’ve essentially memorized the CRSP/Compustat database. Name an anomaly and we can probably tell you the stats on it fairly quickly. Legitimate anomalies can usually be described via a behavioral finance lens: Can we identify poor psychology in the market? (Why do

The objective of this thesis is to develop and back-test an investment strategy created by professors Wesley R. Gray and Tobias E. Carlisle in their book Quantitative Value, published in 2013. Gray and Carlisle construct a quantitative strategy based on Warren Buffet’s investment philosophy and

Back in March I wrote an article called “Good Days for T-Bonds” that basically highlighted the fact that the last five trading days of the month have historically been the best time to be long t-bonds. And so of course, Murphy immediately invoked his pesky rule and the last five days of March

We are proud to announce that Nathan Faber and Andrew Gogerty – both members of Newfound Research's Investment Strategies team – placed 2nd and 3rd, respectively, in the 2015 National Association of Active Investment Managers (NAAIM) Wagner Award Competition.The NAAIM Wagner Award is

Special Announcement Newfound’s first quarter commentary is now available on our website and can be accessed here. Market Thoughts Those familiar with our Risk Managed Sector series (U.S. large-cap, U.S. small-cap, and global large-cap) know that we utilize an equal-weighting methodology among the

Quantopian Open winner Simon Thornington's stock trading algorithm will manage $100,000 for six months, then he takes home all the profits. The winning algorithm secured victory with a strong two-and-a-half month paper trading track record. "Simon's stable, low-beta strategy is a

Singapore has some nice perks. One of them is the variety of books about Indonesia to browse in the library (I am an Indophile). While spending an afternoon reading about the minutiae of Sumatran history in the 19th century, I read a curious first hand account from a Dutchman in North Sumatra. I

This strategy goes over JP Morgan’s SCTO strategy, a basic XL-sector/RWR rotation strategy with the typical associated risks and returns with a momentum equity strategy. It’s nothing spectacular, but if a large bank markets it, it’s worth looking at. Recently, one of my readers, a managing

In researching different trading strategies, you will come across simplified reference implementations, whereby your position in an asset is simply the price at a given point in time. Price returns can then be calculated based these prices, which can then be fed into a further calculation such as

We have been working on a new charting engine for xts::plot.xts for the past couple years. It started with Michael Weylandt's work during the 2012 Google Summer of Code, and Ross Bennett took up the torch during the 2014 GSoC. This new engine improves the functionality, modularity, and

I have combined my recent interests in backtesting and lazy data structures into the "Lazy Backtesting" web app. Pull data straight from Quandl; have it cleaned auto-magically; and code up your strategy's trading rules. It's clean and simple.

Asset returns after cuts in China Bank Reserve Ratio

We examine 2,190 SEC Accounting and Auditing Enforcement Releases (AAERs) issued between 1982 and 2005. We obtain a comprehensive sample of firms that are alleged to have misstated their financial statements. We examine the characteristics of misstating firms along five dimensions: accrual quality,

Dear visitors, We have launched a new subpage on Quantpedia.com which will contain master lists of tools for quantitative traders. We have started with a comprehensive lists of backtesting software and historical data sources: http://quantpedia.com/Links/Backtesters

[Part of a series on timing the S&P 500 by using the implied skew index, begin here] Over the previous days, the skew strategy has had improving, but alas, abominable Sharpe ratios. I have finally stumbled upon a recipe which beats the S&P 500 Sharpe over the last quarter of a century (and a

Friday was the 1st time SPY has closed at even a 5-day low since 3/26. The study below is one I have shown before. It examines other times when the SPY closed at a 5-day low for the 1st time in over 2 weeks. All stats are updated. Results here suggest a moderate upside edge. The lesson with this

This was my question before I started posting backtest results of the Iron Condor options strategy at the beginning of 2014: "does the iron condor options strategy really work". At that time, I had been trading a hedged, unbalanced, iron condor variation with specific adjustment rules. We

Check out the previous post in this blog for a blow by blow account of building strategy around skewness (part 1). Up until now the strategy knowed back and forth between buying and selling 100% as the skew became more or less favourable. Now, we add a little nuance. The implied skew index is a

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 Peer’s Keeper? Social Responsibility in Financial Decision Making (Fulbrunn and Luhan) Employees Will Work Harder Under Loss

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

There is a lot of talk about stocks being expensive, but also a lot of people not really doing anything about it. Many simply don’t know how to tackle the problem, and others don’t want to think about it at all. Below, for some perspective, are historical returns to stocks since 1970 and the 10

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 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

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, today’s loss seems far less worrisome than you probably heard today. But, with the current bull market well above average duration and performance since

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

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

The Self-Similarity metric has been a popular series. Recently the original post was shared on Jeff Swanson’s 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

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 Scott’s Investments, which is otherwise focused on momentum, trend, income and market timing strategies. The portfolio tracks returns

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

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

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