This is a summary of links featured on Quantocracy on Tuesday, 03/07/2023. To see our most recent links, visit the Quant Mashup. Read on readers!
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The Turbulence Index: Regime-based Partitioning of Asset Returns [Portfolio Optimizer]The turbulence index, introduced in the previous blog post, is a measure of statistical unusualness of asset returns popularized by Kritzman and Li1. It provides a way to measure how much the behavior of a group of assets differs from its historical pattern. In this post, based on the paper Optimal Portfolios in Good Times and Bad by Chow et al.2, I will describe how the turbulence index can be
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Active versus index funds: Latest results [Mathematical Investor]Fifty years ago, Princeton economics professor Burton Malkiel published A Random Walk Down Wall Street. He boldly asserted that a blindfolded chimpanzee throwing darts could pick a stock portfolio that would do as well as one created by many expert practitioners in the field. At the time, Malkiel envisioned a strategy of owning a broad-based set of stocks, saying mimicking a major stock index such
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Shorting Lousy Stocks = Lousy Returns? [Finominal]Shorting stocks with poor features was unattractive throughout most of the last decade Combining features would not have improved performance It only started working again in 2022 INTRODUCTION Playing the stock market should be easy. When the economy is booming, buy equities. When its deteriorating, short them. Stock selection shouldnt take much effort either we just need to apply the
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Salience Theory: How does it impact Momentum Profit? [Alpha Architect]This research examines the potential of enhancing a standard momentum strategy using signals derived from Salience Theory (ST). The strategy presented here is to exclude stocks with extreme salience scores and then analyze the risk and return properties of the ST strategy. Salience theory and enhancing momentum profits Myounghwa Sim, Hee-Eun Kim Finance Research Letters A version of this paper can