This is a summary of links featured on Quantocracy on Tuesday, 04/04/2017. To see our most recent links, visit the Quant Mashup. Read on readers!
-
What are the Best & Worst Times of Day to Buy the Stock Market? [MKTSTK]I awoke this morning to find the S&P 500 futures down about 11 points. My immediate thought was oh goodie, theres some candy for the old early morning BTFDers to enjoy [translation, Ill be the market goes up from here]. This instinct was based on many such mornings of observing and interacting with the stock market. But how good is this intuition, and more importantly are
-
Can We Use Mixture Models to Predict Market Bottoms? [Black Arbs]In Part 1 we learned about Hidden Markov Models and their application using a toy example involving a lazy pet dog. In Part 2 we learned about the expectation-maximization algorithm, K-Means, and how Mixture Models improve on K-Means weaknesses. If you still have some questions or fuzzy understanding about these topics, I would recommend reviewing the prior posts. In those posts I also provide
-
Understanding False Discovery Rate [Eran Raviv]False Discovery Rate is an unintuitive name for a very intuitive statistical concept. The math involved is as elegant as possible. Still, it is not an easy concept to actually understand. Hence i thought it would be a good idea to write this short tutorial. We reviewed this important topic in the past, here as one of three Present-day great statistical discoveries, here in the context of
-
Looking to Improve your Factor Investing? Examine the Trend of Profits [Alpha Architect]A few years ago, the profitability quality factor was originally proposed by Robert Novy-Marx. Here is a snippet from the abstract of the paper: Profitability, measured by gross profits-to-assets, has roughly the same power as book-to-market predicting the cross-section of average returns. Profitable firms generate significantly higher returns than unprofitable firms, despite having
-
Prospect Theory, Bias, and Chalk: Our 2017 March Madness Wrap [Invest Resolve]Congrats to the First Place Loser Lets start off in the obvious place: Mike Philbrick, the poor-mans Gronkowski, went wire-to-wire in last place. That makes us happy, and so first and foremost, we come to bury him. Its entirely his fault. We know because the scoring rules were such that, assuming public betting markets are reasonably good proxies for the true odds of a team winning a
-
Do Price Multiples Predict Market Returns? [Larry Swedroe]A large body of work demonstrates that price multiples, such as the dividend-to-price ratio, predict stock returns. As a result, modern asset pricing theory increasingly incorporates time-varying expected returns. The majority of the empirical work underpinning these findings uses U.S. stock market data going back to 1926. Benjamin Golez and Peter Koudijs contribute to the literature on return