Quant Mashup S&P500 – Statistics – February [Stockdotnu]Monthly statistics for the S&P500 based on the closing price between year 1950-1958 and 2014 or 1995 to 2014. In pictures, mean, median, win rate per trading day, sum %, profit factor, avg. trade %, quartiles and percentiles. Quartiles and Percentiles on monthly development, graph at top is the(...) Is It Time to Buy Energies? [Jay On The Markets]A quick glance at Figure 1 is enough to scare the daylights out of most sane investors.fsenx 1 Figure 1 – SPDR Energy (ticker XLE) (Courtesy AIQ TradingExpert) Thanks primarily to Saudi Arabia’s desire to “boost market share” by putting a lot of oil producers around the globe “out of(...) Software you lose when leaving a university: Mathematica [Walking Randomly]I’ve been working at The University of Manchester for almost a decade and will be leaving in just less than 3 weeks time! A huge part of my job was to support a major subset of Manchester’s site licensed application software portfolio so naturally I’ve made use of a lot of it over the years.(...) Rob Hanna Will Be On TimingResearch’s Weekly Webshow – 1pm EST on Monday [Quantifiable Edges]I have been asked to join a live discussion panel being put on by TimingResearch. Each week, TimingResearch surveys a large group of traders to get their thoughts about current market conditions. TimingResearch then produces a report based on the survey. Hidden Markov Models – Trend Following – Sharpe Ratio 3.1 – Part 4 of 4 [Gekko Quant]Part 3 of this series demonstrated how to train a HMM on a toy model, this post will focus on how to actually go about modelling real life data. A trend following strategy will be developed for trading the S&P 500. In most machine learning classification problems you need a set of training data(...) A Look At The January Barometer [Quantifiable Edges]The January Barometer is a fairly famous study from the Stock Traders Almanac. It says that “as goes January, so goes the year”. In other words, a positive January will typically lead to a positive year, while a negative January can be a warning. Let’s look at how the SPX has done for the Ivy Portfolio February Update [Scott's Investments]Scott’s Investments provides a daily Ivy Portfolio spreadsheet to track the 10 month moving average signals for two portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that(...) January’s false start marks return to normal for stocks [MktStk]We have been thinking a lot about winning streaks lately. Looking at charts of the S&P 500 index it is hard not to be impressed by how many positive monthly returns we have had since the “resolution” of the last full-blown Euro crisis in mid-2012. We wanted to gain some historical(...) Comparing Flexible and Elastic Asset Allocation [QuantStrat TradeR]So recently, I tried to combine Flexible and Elastic Asset Allocation. The operative word being–tried. Essentially, I saw Flexible Asset Allocation as an incomplete algorithm — namely that although it was an excellent method for selecting securities, that there had to have been a better way to(...) Everything Old is New Again [Meb Faber]Reading old investment books is somewhat of a hobby of mine (I know probably need a better hobby). Glancing up on my bookshelf there are titles most have never heard of such as Once in Golconda, The Zurich Axioms, and Supermoney. I was flipping through another book new to me that I found when(...) Manliness implies Misreporting? [Alpha Architect]We examine the relation between a measure of male CEOs’ facial masculinity and financial misreporting. Facial masculinity is associated with a complex of masculine behaviors (including aggression, egocentrism, risk-seeking, and maintenance of social status) in males. One possible mechanism for(...) Off to Bad Start. Down Januaries after 3 or more up years $SPY [@NautilusCap]Off to Bad Start. Down Januaries after 3 or more up years $SPY End of Month down 1 pct triggered 1/30/2015 [Gambulator]See this (In Dec, it did not actually get triggered because it was down a little less than 1 pct) End of Month down 1 pct (ish) triggered 12/31/2014 Correction to Momentum Strategy Winners [CXO Advisory]We have corrected the Momentum Strategy winners list for January 2015 (to be held during February 2015). The third place winner was incorrect due to omission of a dividend. A Look At Struggling “1st Of The Month” Bullishness [Quantifiable Edges]Friday is the last trading day of January. The first day of the month is well known for having a seasonal bullish tendency. Interestingly, I have noted this tendency has not been prevalent over the last few years. This can be seen in the equity curve below. Energy idiosyncratic volatility [Eran Raviv]Recently, volatility has been on the up. Generally, we associate rising volatility with a bear regime, but we also know there is a percolating oil shock. Is the volatility we see in the stock market broad-based, or is it the effect brought about by sharp the drop in oil prices (so related to the(...) Help on an Academic Research Project... [Alpha Architect]Readers, I need your input for a research project. http://smeal.qualtrics.com/SE/?SID=SV_0JKTpsCsXIXnJ9H As many of you are aware, my primary passion is serving as the team leader for Alpha Architect. That said, I still conduct "serious" academic research with various colleagues in my(...) RUT Iron Condor - Dynamic Exit Overview - 66 DTE [DTR Trading]In this post, we will continue the work from the last post, RUT Iron Condor - Dynamic Exit Overview - 80 DTE, but this time we will look at the performance of several dynamic exits for the 66 days-to-expiration (DTE) RUT Iron Condors (IC). We are going to backtest dynamic exits on three basic IC(...) Synthetic Volatility Index Quantified [Quantlab.co.za]In part 1 and 2 of our volatility series I discussed a technique that I've developed to monitor broad market volatility with a Synthetic Volatility Index. Today I'm going to quantify our index by applying it to a liquid universe of equities as a simple entry filter. If volatility indeed(...) Small-caps hanging in there $IWM [@NautilusCap]Small-caps hanging in there $IWM Dual momentum with Value and Momentum factor portfolios [RRSP Strategy]Dual Momentum is a robust portfolio allocation tool. Relative 12 month returns are used to rank assets. Shelter is sought in a safe asset when 12 month absolute returns fall below a threshold. Gary Antonacci describes Global Equities Momentum using US … Predict Stock Returns Using the TREND of Profitability [Alpha Architect]This study shows that the recent trajectory of a firm’s profits predicts future profitability and stock returns. The predictive information contained in the trend of profitability is incremental beyond that provided by the profit level, and it is not subsumed by other well-known determinants of(...) Machine Learning in Finance Workshop [Only VIX]The Data Science Institute at Columbia University and Bloomberg are holding a workshop on Machine Learning in Finance. The presentations look interesting and the price is right - just $30 if you have a valid student ID, or $100 if you don't. Some research articles are already available for(...) Trading stock splits [Alvarez Quant Trading]Trading stock splits is something that I have read about for long time but never researched. This article, A simple way to beat the market with stock splits, caught my eye and gave me the push to investigate the topic. This falls into the category of a topic I have heard a lot about that … A Revelation For Small-Cap Investing Strategies [Capital Spectator]Suddenly business as usual for small-cap investing is in need of a makeover, thanks to a new research paper (a landmark study for asset pricing) that revisits, reinterprets and ultimately revives the case for owning these shares — after controlling for quality, i.e., “junk”. Cliff Asness of(...) Fed Days After 1% Drops [Quantifiable Edges]Selloffs as strong as we saw on Tuesday have been fairly rare just ahead of a Fed Day. In fact it was the 1st time since October 2012 that SPY closed down over 1% on the day before a Fed Day. Below are results of all instances since SPY’s inception in 1993. Applied Portfolio VaR Decomposition. (2) Impact vs Moving Elements. [Quant at Risk]Calculations of daily Value-at-Risk (VaR) for any N-asset portfolio, as we have studied it already in Part 1, heavily depend on the covariance matrix we need to estimate. This estimation requires historical return time-series. Often negligible but superbly important question one should ask here is:(...) Does "Sharpe Parity" work better than "Risk Parity?" [Alpha Architect]Strategies employing Risk Parity have been favored by mutual funds and other market participants the past few years. The attraction of risk parity strategies is the great story associated with the approach and the historical performance over the past 30 years has been favorable. However, there is an(...) Consolidated Source of Data for Bitcoin [Tr8dr]It seems like every other month there is a new bitcoin exchange. For the purposes of trading research & backtesting it is important to have historical data across, at least, the most liquid exchanges. My list would be at least: USD/BTC bitfinex (15%) bitstamp (5%) coinbase (new, but likely to(...) Review of Global Market Correlations: 1995-2014 [Oxford Capital]We reviewed market correlations for eight core groups: (a) Equities, (b) Interest Rates, (c) Currencies, (d) Energy, (e) Metals, (f) Grains & Oilseeds, (g) Livestock, (h) Softs & Woods. Setup: Market Returns = ln(Close[n] / Close[n − LookBack]), where LookBack = 10 bars. Correlation window(...) Down January Pressures February $SPY $QQQ $DIA [Stock Trader's Almanac]In pre-election years, February’s performance generally improves with average returns all turning positive. NASDAQ performs best, gaining an average 2.4% in pre-election-year Februarys since 1971. Russell 2000 is second best, averaging gains of 2.1% since 1979. DJIA, S&P 500 and Russell 1000,(...) Volatility Risk Premium Strategy – And The (Preliminary) Outperformer Is... [Trading the Odds]A couple of weeks ago I started a series of postings, all dealing with trading volatility ETNs / ETFs like XIV® (VelocityShares Daily Inverse VIX Short-Term ETN) and VXX (iPath® S&P 500 VIX Short-Term Futures™ ETN) and respective trading strategies. One of those strategies was DDN’s VRP(...) Factors driving this year's SP500 performance $SPY [@NautilusCap]Factors driving this year's SP500 performance $SPY After Monday’s Big Effort For A Small Gain [Quantifiable Edges]The mild action on Monday did not trigger a whole of studies Monday afternoon but the one below was fairly compelling. It suggests that when SPY closes strong (in the top 10% of its range) but still only manages a small gain on the day, that the next day has a downside tendency. Interviewing the Quants: An Inside Look With “Sanz Prophet” [Sanz Prophet]Interviewing the Quants: An Inside Look With “Sanz Prophet” European Surge [@NautilusCap]European Surge Stock Market and the Super Bowl [CXO Advisory]Investor mood may affect financial markets. Sports may affect investor mood. The biggest mood-mover among sporting events in the U.S. is likely the National Football League’s Super Bowl. Is the week before the Super Bowl especially distracting and anxiety-producing? Is the week after the Super(...) A Simple Tactical Asset Allocation Portfolio with Percentile Channels [CSS Analytics]I prefer presenting new tools and concepts, but I know that there are a lot of readers that would like to see how they can be applied to creating strategies. So here is a very simple strategy that applies Percentile Channels from the last post to a tactical asset allocation strategy. The strategy(...) A Momentum-Based Trading Signal With Strategic Value [Capital Spectator]Traders and investors tend to operate in parallel universes, using different analytical toolkits and looking at markets from radically different perspectives. But sometimes there’s common ground. David Varadi’s recent investigation of what he calls error-adjusted momentum (EAM) to normalize(...) RUT Iron Condor - Dynamic Exit Overview - 80 DTE [DTR Trading]It has taken a long time to get to this point, but we are finally finished reviewing the backtests for our three basic starting structures for the Iron Condor (IC). The three basic starting structures backtested were: Standard: 10 put credit spreads, and 10 call credit spreads (72 total backtests /(...) A New Harry Long Strategy and A Couple of New PerfA Functions [QuantStrat TradeR]So, Harry Long came out with a new strategy on SeekingAlpha involving some usual mix of SPXL (3x leveraged SPY), TMF (3x leveraged TLT), and some volatility indices (in this case, ZIV and TVIX). Now, since we’ve tread this path before, expectations are rightfully set. It’s a strategy that’s(...) Update to MKTSTK’s first book release: Intro to Social Data for Traders [MKTSTK]We wanted to provide an update to everyone who signed up for a free copy of MKTSTK’s first book, Intro to Social Data for Traders by our very own Thomas Pendergrass. This book is intended for traders and investors that want to gain an edge on the competition by including social media and search(...) Do Any Style ETFs Reliably Lead or Lag the Market? [CXO Advisory]Do any of the various U.S. stock market size and value/growth styles systematically lead or lag the overall market, perhaps because of some underlying business/economic cycle? To investigate, we consider the the following six exchange-traded funds (ETF) that cut across capitalization (large, medium(...) Weekend Geekout: The History of Low Volatility Investing [Alpha Architect]Eric Falkenstein is an economist, with a PhD in economics, a quantitative geek, and a book writer. In his blog, Falkenblog, there are voluminous mind-blowing articles since 2008, which definitely worth your time to read. Recently he posted an article about the history of Low Volatility Investing and(...) Engineering a Synthetic Volatility Index – Part 2 [Quantlab.co.za]In last week's post I discussed two basic requirements for our proposed synthetic index: 1) it must accept price as its sole input for its calculation and 2) it must exhibit a high correlation with the VIX when applied to the S&P 500. An indicator that satisfies both of these requirements(...) The Long-Suffering “Average” Investor [Capital Spectator]Earning a respectable investment is hard. Holding it on to it is even harder, according to a variety of studies over the years that have analyzed the portfolios that investor build and own. The news is at once disturbing and baffling. Disturbing because a large population of individuals have earned(...) Style Performance by Calendar Month [CXO Advisory]The Trading Calendar presents full-year and monthly cumulative performance profiles for the overall stock market (S&P 500 Index) based on its average daily behavior since 1950. How much do the corresponding monthly behaviors of the various size and value/growth styles deviate from an overall(...) Dual momentum without the benefit of the bond bull market [RRSP Strategy]Dual momentum, popularized by Gary Antonacci, uses 12 month returns to: rank and select the top asset (RELATIVE) shelter in a safer asset if the absolute value falls below a threshold (ABSOLUTE) Many tactical strategies use bonds as the safer … Why Indexing and "Smart Beta" Are So Popular [Alpha Architect]We study the joint determination of fund managers' contracts and equilibrium asset prices. Because of agency frictions, investors make managers' fees more sensitive to performance and benchmark performance against a market index. This makes managers unwilling to deviate from the index and(...) Analysis of S&P 500 Returns Above & Below The 200 Day SMA $SPY $SPX [Theta Trend]The 200 day SMA is a widely watched indicator of health for the U.S. Stock market. When price is trading above the 200 day SMA, most market participants can agree that a longer term up-trend is either in place or developing. When price is trading below the 200 day SMA, most people recognize that the(...)