This is a summary of links featured on Quantocracy on Saturday, 03/21/2020. To see our most recent links, visit the Quant Mashup. Read on readers!
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Calculating a VIX6M Style Index back to 1990 Reveals Some Volatility Trends [Six Figure Investing]The Cboes VIX, VIX3Msm (93-day), and VIX6Msm (184-day) indexes enable us to quantify volatility term structures but until now, historical analyses between VIX style indexes have been limited to dates after December 2001 in the case of VIX3M and January 2008 for VIX6M. This post introduces the results of VIX6M style calculations back to 1990 and reviews issues and trends that were revealed. In
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What we have been reading to stay calm [Two Centuries Investments]This crisis is bringing out the best in many people. When the stakes become real, alertness is heightened, thinking is crystallized. Here is an eclectic collection of thought pieces weve enjoyed over the past two weeks. Bin There Done That by Morgan Stanley Ample research shows that most experts do not make great forecasts. BIN Model, where B refers to bias, I to information,
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Rebalancing history [OSM]Our last post on rebalancing struck an equivocal note. We ran a thousand simulations using historical averages across different rebalancing regimes to test whether rebalancing produced better absolute or risk-adjusted returns. The results suggested it did not. But we noted many problems with the testsnamely, unrealistic return distributions and correlation scenarios. We argued that if we used
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Cuemacro s TCA software is now open sourced [Cuemacro]Its a difficult time at present around the world. You obviously dont need me to tell you that. Lets hope that we can conquer the coronavirus soon and we all give thanks for those on the front lines, working in hospitals caring for the sick, those working in supermarkets and all those keeping society going through this difficult period. In the meantime, like most you reading this, Ive
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How loss aversion increases market volatility and predicts returns [SR SV]Loss aversion means that people are more sensitive to losses than to gains. This asymmetry is backed by ample experimental evidence. Loss aversion is not the same as risk aversion, because the aversion is disproportionate towards drawdowns below a threshold. Importantly, loss aversion implies that risk aversion is changing with market prices. This means that the compensation an investor requires