This is a summary of links featured on Quantocracy on Tuesday, 04/02/2024. To see our most recent links, visit the Quant Mashup. Read on readers!
-
Economic Momentum [Alpha Architect]Out of the hundreds of exhibits in the factor zoo, momentum was one of just five equity factors that met all the criteria (persistent, pervasive, robust, implementable, and intuitive) Andrew Berkin and I established in our book Your Complete Guide to Factor-Based Investing. Because of the strong empirical evidence, momentumthe tendency of assets that have performed well recently (e.g., over the
-
Optimal Mean-Reversion Strategies [Jonathan Kinlay]Consider a financial asset whose price, Xt, follows a mean-reverting stochastic process. A common model for mean reversion is the Ornstein-Uhlenbeck (OU) process, defined by the stochastic differential equation (SDE): Objective The trader aims to maximize the expected cumulative profit from trading this asset over a finite horizon, subject to transaction costs. The traders control is the
-
Duration as an Equity Factor [Finominal]Stocks can have a high, low, or negative sensitivity to interest rates The duration profile of stocks changes frequently Having rates exposure in an equities portfolio is not necessarily a concern INTRODUCTION The goal of conducting research is to provide clarity by answering questions or confirming theories, but that is not always achieved. For example, we published two research articles on