There is a 72% probability of the San Franciso Bay Area getting hit by at least one earthquake of a magnitude of 6.7 or stronger between today and 2043 according to the United States Geological Survey, which is a scientific agency of the U.S. government. An earthquake of that magnitude is likely to

A higher-order function is a function that takes one or more functions as arguments, and\or returns a function as its result. This can be super handy in programming when you want to tilt your code towards readability and still keep it concise. Consider the following code: # Generate some fake data

Fed Days have a long history of showing a bullish tendency, and we have a large number of Fed Day studies to refer. For those that are unaware, a Fed Day is simply a day where the Federal Reserve completes a scheduled meeting and provides a policy announcement. Meetings typically take place 8 times

In today’s video, we examine three posts. First, we examine ESOPs and 1042 QRP (qualified replacement property) with Doug Pugliese. Second, we examine a guest post by Nicolas Rabener examining Value, Momentum and Carry over the past 10 years. Last, we examine a guest post by Elisabetta discussing

This post will introduce KDA Asset Allocation. KDA — I.E. Kipnis Defensive Adaptive Asset Allocation is a combination of Wouter Keller’s and TrendXplorer’s Defensive Asset Allocation, along with ReSolve Asset Management’s Adaptive Asset Allocation. This is an asset allocation strategy with a

Defining Technical Chart Patterns Programmatically Ever wondered how to programmatically define technical patterns in price data? At the fundamental level, technical patterns come from local minimum and maximum points in price. From there, the technical patterns may be defined by relative

In 2012, Eike Batista had an estimated worth of more than $35 billion. The self-made Brazilian billionaire created an empire that stretched from mining to oil to public works. Many considered him the pride of Brazil. Barely two years later, he had lost all $35 billion…and owed another $1.2 billion

Six recent asset allocation articles (tactical or otherwise) that you might have missed: 1. Fragility Case Study: Dual Momentum GEM (Newfound) + Response from Gary Antonacci Corey’s post kicked off quite a lively discussion. I encourage you to click through to both pieces, but here’s the

(This is an excerpt from my upcoming book on positional option trading.) The traders’ concept of the Efficient Market Hypothesis (EMH) is, “making money is hard”. This isn’t wrong, but it is worth looking at the theory in more detail. Traders are trying to make money from the exceptions to

Rankings are everywhere in the finance industry. A number of papers identify bonus schemes and tournament incentives(1) among the main drivers of excessive risk-taking in developed financial markets. The article studies the impact of rankings on professionals’ risk-taking investment decisions.

While retirement planning is often performed with Monte Carlo simulations, investors only experience a single path. Large or prolonged drawdowns early in retirement can have a significant impact upon the probability of success. We explore this idea by simulation returns of a 60/40 portfolio and

China exhibits the world’s highest corporate debt as % of GDP However, Chinese stocks are not significantly more levered than U.S. stocks Asset and debt growth has stalled in 2018, likely indicating an economic slowdown INTRODUCTION The McKinsey Global Institute published an influential study in

Containment of drawdowns and optimization of performance ratios for multi-asset portfolios is critical for trading strategies. Alas, short data series or structural changes often render estimates of covariance matrices unreliable. A popular solution is risk-parity with volatility targeting. An

Jack Bogle, founder of Vanguard Funds and a life-long apostle of index investing, died on 16 January 2019. Vanguard CEO Tim Buckley summarized his career in these terms: “Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless

The October 2018 market correction where the S&P 500® Index fell by 7%, its worst October since 2008,(1) left investors searching for a culprit. Some of the usual suspects were blamed — rising geopolitical tensions ahead of the US midterms, the high likelihood of a slowdown in economic and

Welcome to the newly re-titled weekly video, Compound Your Knowledge. In today’s video, we examine three posts. First, we examine a simple analysis of 2018 Factor portfolio returns. Second, we examine a guest post by Jon Seed examining Warren’s put options, and how they are different than most

Corey Hoffstein of Newfound Research recently wrote an article called, “Fragility Case Study: Dual Momentum GEM.” Corey starts out saying my dual momentum approach is the strategy he sees implemented the most among do-it-yourself tactical investors. Corey then said several investors bemoaned

This is a test of two tactical asset allocation strategies from Brian Livingston’s new book Muscular Portfolios and his site MuscularPortfolios.com: the “Mama Bear” and “Papa Bear” Portfolios. The short and sweet take: neither of these strategies tread new ground – they’re both based

As I write this around 11am EST both NFLX and CELG are threatening to close up > 50% from their December 24th closing price, just 14 trading days ago. While that sometimes happens with speculative smallcap stocks, it is very unusual to see a largecap S&P 100 stock accomplish such strong gains

Factor investing is a broadly used approach in asset management, specially for the equity market, but, can we apply this idea in order to explain currency returns? The idea at the core of factor investing is that there are different sources of risk in the market and that the exposure of the

We’ve posted our quarterly attribution materials on our performance site.(1) We enjoyed putting the materials together and think they will be informative for those who follow our Indexes. The materials and videos are part of our long-term plan is to continually improve our quarterly communications

Trading and investing doesn’t have to be complicated. Check out this chart: source: Dimson, Marsh and Staunton, Triumph of the Optimists The blue line shows returns from US Stocks from 1900 to today. That’s a 48,000x increase in nominal value. The yellow line shows returns from US Bonds from

Many quantitative trading strategies thrive in high volatility regimes, while other trading strategies work best in low volatility regimes. So which global markets are the most and least volatile? This post compares the daily, overnight, and intraday volatility of 17 countries. Methodology Using

The purpose of this study was to examine the changes in the distribution of the US equity risk premium as the return horizon varies from monthly, annually, 3 year, 5 year, 10 year, 20 and 30 year periods. The equity premium was calculated as the monthly difference between the Market and Treasury

Recent market volatility has caused many tactical models to make sudden and significant changes in their allocation profiles. Periods such as Q4 2018 highlight model specification risk: the sensitivity of a strategy’s performance to specific implementation decisions. We explore this idea with a

ESG factors generated positive excess returns since 2009 Show positive exposure to Low Volatility & Quality and negative exposure to Value & Size Factor exposure is likely structural and not temporary INTRODUCTION BlackRock is aggressively launching products with high environmental, social,

2019 is well underway. 2018 was personally difficult, so I am happy it’s behind us. Without further ado, here is what my analytics report shows to be the three most popular posts for 2018: – Create own Recession Indicator using Mixture Models (3:53 minutes average time on page) – Portfolio

Quandl, the leading platform for financial and alternative data, will host its third annual Quandl Data Conference (formerly the Alternative Data Conference) on February 28, 2019, at Convene’s 46th St. location in New York City. “We launched this event nearly three years ago to create awareness

Opex week overall has typically been a bullish part of the month for the market. But over the last 20 years, January has been a major exception to this rule. The table below shows results of buying the Friday before options expiration week in January and then selling at the close of option

Liquidity yields are convenience yields of financial securities that typically arise from high liquidity, suitability as collateral or preferred regulatory status. New research argues that relative changes in liquidity yields on government bonds across countries have a significant impact on exchange

A “pump-and-dump” scheme promoter: (1) builds a position in a stock (often a thinly traded penny stock); (2) gooses its price by spreading misleading information; and, (3) liquidates the position once the stock reaches. Who responds to such schemes and what are their returns? In the December

I have a Google Home in my bathroom that I play a morning routine while I shave, brush my teeth and get ready for the day. One step is to play The Indicator podcast from Planet Money. This morning they were talking about how “2018 was one of the most volatile years on record for the stock

If you are working in finance, you have almost surely heard of risk-reward ratios and probably used some of them to evaluate the performance of a stock, ETF, or any other investment strategy. Among the different alternatives, the most popular risk-reward ratio is the so-called Sharpe ratio, first

Unless you are a die-hard buy-and-hold investor, chances are that you need to rebalance your portfolio at some point. The question is when? And how often? And why at a specific time? Some strategies rebalance once a year, some multiple times a day. What if there were better times to rebalance? Last

It’s anyone’s guess if the recent rebound in US equities will soon push the S&P 500 Index to a new high. What we do know is that the market has staged a solid bounce so far. For the eight trading days since Christmas Eve’s close, when the S&P’s current drawdown hit bottom, the index

The strong breadth we have seen recently has caused the 10-day exponential moving average of the NYSE Up Issues % to rise up to 62%. A move through 61.5% after being below 40% within the last 2 weeks is considered a Zweig Breadth Thrust trigger. This is a signal created by Martin Zweig. Over the

What are the Research Questions? Can investors identify skilled and unskilled mutual fund managers by observing their tendency to herd? Do differences in herding behavior across funds predict mutual fund performance? Does skill drives the link between herding and future performance? Does herding

961%. That’s the amount of gains you would have missed had you followed the market timing strategy I’m going to describe in the following article that utilizes the CAPE ratio. Yes, that’s significant. But there’s far more to this story, and I suspect that had you acted on this strategy,

Smart beta Value ETFs are relatively homogenous Some show high exposures to other equity factors, which may represent risk Excess returns from smart beta are significantly lower than long-short factor returns INTRODUCTION The last ten years can be viewed as a lost decade for Value investors as

Portfolio risk is traditionally quantified by volatility. The benefits of diversification are measured in how portfolio volatility is changed with the addition or subtraction of different investments. Another measure of portfolio risk is the dispersion in terminal wealth: a measure that attempts to

Fundamental value seems like a straightforward investment approach. One simply looks for assets that are “cheap” or “expensive” relative to their rationally expected risk-adjusted discounted cash flows. In reality, conscientious estimation of fundamental value gaps is one of the most

Reproducible Finance with R is a clever book, with modern treatment of classical concepts. Here below is what I liked- and disliked about the book. Back when I was practicing Judo, there was a guy in my group who mastered that one exercise (called Uchi Mata). He could go fighting 20 consecutive

We can’t say with certainty where the market goes from here – whether the market will turn around in January or continue into bear territory – and neither can anyone else. What we can say for certain however is that big up days like we saw today (SPY +3.35%) are not an indicator that this

As the year turns, a common practice is to assess a portfolio and see how each position performed. The summary for stocks is easy: equities did not do well. Whether you were invested in U.S. stocks (down ~5%+), developed markets (down ~13%+), or emerging markets (down ~20%+), being invested in

Last night’s subscriber letter featured (an expanded version of) the following study, which looks at performance in the 1st couple of days following a positive 1st day of a new year. 2019-01-03 The stats and curve all suggest some immediate follow-through has been typical. There have now been 10

This is a summary of the recent performance of a wide range of excellent tactical asset allocation strategies, net of transaction costs. These strategies are sourced from books, academic papers, and other publications. While we don’t (yet) include every published TAA model, these strategies are

If you're a short seller exploring global markets, a good first question to ask is: are there shares available to borrow? This post looks at the percentage of stocks that are shortable through Interactive Brokers in each of 17 countries. Data source Interactive Brokers provides an FTP site with

Spurious results are the norm Having done a healthy share of paper replications over the past decade, and having been consistently disappointed when the models or techniques broke down on data shortly after (or even before) the authors’ sample periods, I would say that data misuse is a gigantic