This is a summary of links featured on Quantocracy on Wednesday, 01/11/2017. To see our most recent links, visit the Quant Mashup. Read on readers!
The January Effect: An Evidence-Based Perspective [Alpha Architect]January is here again and market commentators are already telling stories about the so-called January Effect. Some articles (examples here and here) are saying the effect is an illusion, while others are claiming the effect can help you make some profits (examples here and here). Before we dig into the academic research on the subject, lets first understand the January Effect. Put simply, the
Cointegrated ETF Pairs Part I [Quantoisseur]The next two blog posts will explore the basics of the statistical arbitrage strategies outlined in Ernest Chans book, Algorithmic Trading: Winning Strategies and Their Rationale. In the first post we will construct mean reverting time series data from cointegrated ETF pairs. The two pairs we will analyze are EWA (Australia) EWC (Canada) and IGE (NA Natural Resources) EWZ (Brazil). 1
When Noise Overwhelms Signal Sorting out Sorts Review [Alphaism]In his 1998 paper, Jonathan Berk illustrated that by sorting stocks based on a variable (e.g. B/E ratio) correlated to a known variable (e.g. beta), the power of the known variable to predict expected return within each group diminishes when tested with cross-sectional regression. This is very likely why Fama and French found the explanatory power of beta disappeared (1992) and Daniel and Titman