We examine whether and to what extent successful equities investment strategies are transferrable to the commodities futures market. We investigate a total of 7 investment strategies that involve optimization and mean-variance timing techniques. To account for the unique characteristics of the

Victor Haghani began his career at Salomon Brothers in 1984, starting out in a research role before joining their prop trading desk. In 1992, Victor left Salomon to become one of the founding partners of Long Term Capital Management… LTCM was an incredibly successful hedge fund, up until 1998,

In asset management research, we often assume an investor has an infinite horizon, no spending requirements, and no tax consequences. While this may be appropriate for some institutions, it is rarely appropriate for individual investors, leaving financial advisors to fill the gaps. Many factor

Title: A WEALTH MANAGEMENT PERSPECTIVE ON FACTOR PREMIA AND THE VALUE OF DOWNSIDE PROTECTION Authors: LOUIS SCOTT AND STEFANO CAVAGLIA Publication: THE JOURNAL OF PORTFOLIO MANAGEMENT, SPRING 2017 (version here) What are the research questions? The article links two current hot topics: goal based

According to S&P DJ Indices, 92% of all actively managed stock funds failed to beat their benchmarks over the past 15 years. This should come as no surprise. Similar results were published more than 20 years ago. This information has caused a move away from active stock selection and toward

The astonishing bull market (bubble?) in Bitcoin has drawn attention to the cryptocurrency from all corners. One of the questions that’s reasonating: Should Bitcoin be treated as an asset class, on par with stocks, bonds, real estate and commodities? A Forbes article last year, citing a study by

I assume that you're reading this because you are one of many people who were affected by the changes to Yahoo Finance data in May (2017). Not only did the URL change, but the actual data changed as well! The most noticeable difference is that the adjusted close column is now only

This paper compares and contrasts factor investing and sector investing, and then seeks a compromise by optimally exploiting the advantages of both styles. Our results show that sector investing is effective for reducing risk through diversification while factor investing is better for capturing

In 2012 we published a whitepaper entitled “Adaptive Asset Allocation: A Primer” in which we built upon the simple, robust momentum framework proposed by Mebane Faber in his 2009 study “Relative Strength Strategies for Investing.” Our approach utilized a portfolio optimization overlay to

This is the third in a new advanced series of posts written by Imanol Pérez, a PhD researcher in Mathematics at Oxford University and an expert guest contributor to QuantStart. In this post Imanol applies the Theory of Rough Paths to the task of handwritten digit classification—a common task for

Negative month for the State of Trend Following report, putting the YTD well in the red. Please check below for more details. Detailed Results The figures for the month are: May return: -3.14% YTD return: -7.44% Below is the chart displaying individual system results throughout May: StateTF May And

This is a test of the “Classical Asset Allocation” strategy from the paper Momentum and Markowitz: A Golden Combination, authored by three of our favorite minds in tactical asset allocation: Dr. Wouter Keller, Adam Butler of GestaltU/ReSolve AM, and Ilya Kipnis from the blog QuantStrat TradeR.

Title: PORTFOLIO CONCENTRATION AND PERFORMANCE OF INSTITUTIONAL INVESTORS WORLDWIDE Authors: NICOLE CHOI, MARK FEDEINA, HILLA SKIBA, TATYANA SOKOLYK Publication: JOURNAL OF FINANCIAL ECONOMICS, 2017 (version here) What are the research questions? Portfolios in international markets tend to be more

May 2017 Trend Following: DOWN -2.59% / YTD: -13.91% Despite a pick up in the second half of the month, the index closed last month in the red, continuing the downward trend for the year. Below is the full State of Trend Following report as of last month. Performance is hypothetical. Chart for May:

Factors such as value, size, and momentum are generally constructed using dollar-neutral portfolios in academic literature. The market beta exposure in these portfolios is often significant and can vary substantially over time. Each factor has gone through periods where these features have been

If you consider yourself Econometrician\Statistician or one of those numerous buzz word synonyms that are floating around these days, Computer Age Statistical Inference: Algorithms, Evidence and Data Science by Bradley Efron and Trevor Hastie is a book you can’t miss, and now nor should you. You

IQFeed provides streaming data services and trading solutions that cover the Agricultural, Energy and Financial marketplace. It is a well known and recognized data feed provider geared toward retail users and small institutions. The subscription price starts at around $80/month. Stanislav Kovalevsky

It seems like a very long while since my bachelor. Checking my bookshelf the other day I was thinking to flag some of those books which helped or inspired me along the way. Here they are in no particular order. Risk: Elements of Financial Risk Management Clear and to the point, 5 stars. Value at

In the past we have discussed that some investors demand dividends. (Here is a nice post by Larry Swedroe on the topic and there are more holistic measures, such as shareholder yield, which are better predictors of future returns). A few posts we have on the topic highlight that CEOs cater to

One study from the Quantifinder that triggered last has some potential intermediate-term implications, and it is fairly interesting, so I figured I would share it. This study looked at the SPX closing price in relation to its 50-day Bollinger Bands, and the fact that we are now extended upwards. I

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

It can be really interesting and exciting to research the markets and test different ideas but at some stage we need to decide if the strategy is ready for live trading. Some traders can get stuck endlessly researching… Trying to find that perfect system… Which comes at a cost. How do we avoid

As always, happy Friday! In this Free Friday post, I want to pose a poll question. After reading the post and viewing the graphs please respond to the poll below and I will publish the results in another post later next week. The question is… would you trade this strategy? Polls Would you trade

It was another great year for the R/Finance conference, held earlier this month in Chicago. This is normally a fairly private affair: with attendance capped at around 300 people every year, it's a somewhat exclusive gathering of the best and brightest minds from industry and academia in

There exists a vast amount of studies that show an increase in correlation between global equity indices during bear markets and propose ways to measure/forecast this correlation (see for example Campbell, Koedjik and Kofman or Capiello, Engle and Sheppard, and many, many more). These studies differ

As long time readers of my blog know, I often use a market timing indicator in my strategies. My favorite one, and a simple one, is using the 200 day moving average on either the SPY or S&P 500 Index. I recently ran into these posts, Using Market Breadth To Gauge Market Health (Part 5) and

If you are looking for research on stock selection, you’re in luck — the research is everywhere and has arguably been overdone. Get started with Moon Cycles & Stock Market Returns and The Congressional Calendar & Stock Market Returns to get a sense for how esoteric the research has

This is the third in a series of posts written by Frank Smietana, an expert guest contributor to QuantStart. In this detailed post Frank examines the different algorithmic trading strategies carried out by quantitative hedge funds. Click for parts one and two. - Mike. Institutional asset managers

In 2008, in the middle of the global financial crisis, Satoshi Nakamoto published a white paper describing the bitcoin protocol. The bitcoin blockchain then came into existence on January 3, 2009 when Nakamoto created the genesis block — the first block of the blockchain. All subsequent blocks

One compelling study that triggered tonight suggested the recent persistent upmove is unlikely to abruptly end. (This is a theme we have seen many times over the years.) It considers what happens after SPX moves up at least 5 days in a row to a 50-day high, and then pulls back. (This is the current

Around a quarter of a century ago I wrote a paper entitled “Equity Convexity” which – to my disappointment – was rejected as incomprehensible by the finance professor who reviewed it. But perhaps I should not have expected more: novel theories are rarely well received first time around. I

Title: FACTOR BASED INVESTING: THE LONG TERM EVIDENCE Authors: ELROY DIMSON, PAUL MARSH, AND MIKE STAUNTON Publication: THE JOURNAL OF PORTFOLIO MANAGEMENT, 2017, SPECIAL ISSUE (version here) What are the research questions? Is there out-of-sample (OOS) evidence for factor investing? What are the

Quantifiable Edges is now offering our Fed Day research and tools to anyone that makes any size donation to the MS Society! Keep reading for details. One bit of research that Quantifiable Edges has become known for are the many studies I have published on Fed Days. In fact, you could say I wrote the

Limited attention drives us to focus on the big details of investment strategies. Small details can have an outsized impact on performance, especially if they can compound upon one another. To quote Aaron Brown, Head of Risk at AQR: “It takes a lot of compounding to turn a mistake into a disaster.

Active asset management has been under attack during the past several months. Hedge funds have been shutting down left and right, labeled as overpriced and underperforming, and are losing capital to low cost passive mutual funds and ETFs. Active mutual funds have been losing ground as well to their

As a former US Marine, Memorial Day is every day, however, Memorial Day is special because the time is set aside to reflect on those who paid the ultimate sacrifice. Enjoy and stay safe out there! In addition to enjoying the long Memorial Day weekend, we offer a unique opportunity to honor the

This post will be a modified backtest of the Adaptive Asset Allocation backtest from AllocateSmartly, using the Hierarchical Risk Parity algorithm from last post, because Adam Butler was eager to see my results. On a whole, as Adam Butler had told me he had seen, HRP does not generate outperformance

How much higher can smart beta adoption climb? Now in its fourth year, FTSE Russell’s latest annual survey of global institutional asset owners indicates that smart beta adoption is at an all time high and that investors continue to find new applications for its use. The survey, Smart beta: 2017

Motivated by behavioral theories, we test whether recent past performance of the momentum strategy (Past Momentum Performance--PMP) negatively predicts the performance of stale momentum portfolios. Following periods of top-quintile PMP, momentum portfolios exhibit strong reversals 2-5 years after

While seeing some “sell in may” headlines a while ago, thought i’d pull up the monthly mean returns for spx and vix. I wanted to see them on an even keel, so that each month starts at 0%, to better gauge their monthly behaviour 1 2 3 4 5 6 7 8 9 import pandas as pd import numpy as np import

Quick note... for those not already listening, my buddy Patrick O’Shaughnessy has one of the (if not the) best investing podcasts out there with his podcast Invest Like the Best. Each week he sits down with some of the best capital allocators, investment thinkers, etc... in the world and really

One of the great debates in finance is whether the source of the value premium is risk-based or a behavioral anomaly. In our book, “Your Complete Guide to Factor-Based Investing,” my co-author Andrew Berkin and I present the evidence showing that there are good arguments on both sides. Thus,

Imagine you’re a financial economist who thinks that some risk factor,{\color{white}i}f_t, explains the cross-section of expected returns. And, you decide to test your hunch. First, you regress the realized returns of N different assets on{\color{white}i}f_t to estimate each asset’s exposure to

The investment industry has investors convinced that the only path to better performance is through stock selection. As a result, most investors approach the challenges of portfolio construction exactly backward and miss out on the most important opportunities to produce differentiated performance.

are to Editor’s Note: The Academic Research Insight will be a weekly short-form research summary on research that is directly related to investing. Elisabetta Basilico (a PhD and a CFA!) will be driving the effort, which will supplement our long-form summaries, in-house research, and general

Algorithmic trading has seen great traction in recent years and the numbers of students, engineering graduates, and finance professionals looking to explore this lucrative domain has been growing exponentially with each passing year. Are you among the ones looking to learn quant skills and also make

This post will be about replicating the Marcos Lopez de Prado algorithm from his paper building diversified portfolios that outperform out of sample. This algorithm is one that attempts to make a tradeoff between the classic mean-variance optimization algorithm that takes into account a covariance

Momentum-based sector rotation is a popular investment strategy. Recent academic studies have shown that alternative implementations of standard momentum – including risk-adjusted momentum, residual momentum, and “frog-in-the-pan” momentum – can significantly improve the risk-adjusted and

his is the second in a new advanced series of posts written by Imanol Pérez, a PhD researcher in Mathematics at Oxford University, and a new expert guest contributor to QuantStart. In this post Imanol continues the theoretical discussion of Rough Paths and Signatures and begins applying them within

The recent decision by Yahoo to screw with their API for financial data (and in the process disabling all packages/functions in various programing languages obtaining EOD (end-of-day) data, at least temporarily) shows us two important things: Nothing is free and reliable forever It’s a good idea