Quantocracy’s Daily Wrap for 04/07/2016

A common tactic for some traders is to scale out of successful positions. The logic is this: Ive already made some money, so I want to hold onto some of that. Ill cash out a portion of my trade now, and see how the trade continues, but with reduced risk. You see this behavior with day traders, as well as long-term investors. But its a fallacy. And its costing you money. Lets devise

Everybody know that volatility depends on the measurement frequency: the standard deviation of 5-minute returns is different from that of daily returns. To be precise, if z is the log price, then volatility, sampled at intervals of ?, is volatility(?)=?(Var(z(t)-z(t-?))) where Var means taking the variance over many sample times. If the prices really follow a geometric random walk, then

Skill is a slippery concept in finance, courtesy of the shady influence of chance in asset pricing. It's also an awkward topic in just about every corner of money management because discussing it in detail invariably raises serious doubts about our ability to engineer investment results that are satisfactory much less stellar. But ignored or not, randomness is a factor and perhaps a far more

Large institutional investors have had access to low-cost "smart beta" for many years. But for retail investors and their financial advisors, "smart beta" ETFs are a welcome innovation. Instead of trying to identify an expensive manager who can pick stocks, a retail investor can leverage relatively low-cost smart beta active management and capture better risk-adjusted returns.

With our inaugural March Madness Portfolio Challenge in the books, were going to cover three very important takeaways. Takeaway #1: I mean, it wasnt even close Yes, in this part we pay homage to our esteemed champion, who has earned the glory due unto him by leading more or less the entire way. His name is Dan Adams, and he pseudonymously submitted one of his entries under the

This study documents persistent, net-of-fees, alpha-generating commodity trading advisor funds focused on commodity investment ("Commodity Funds"). The baseline for performance measurement is a new benchmark model that includes factors established in the literature. A nonparametric bootstrap test establishes the existence of alpha that cannot be explained by luck. Performance persists 12

This post looks at the consequences of ETF rebalancing. These funds follow pre-announced rules that involve discrete thresholds. The well-known SPDR tracks the S&P 500, but there are over 1400 different ETFs tracking a wide variety of different underlying indexes. When any of these underlying indexes change, the corresponding ETFs have to change their holdings. These thresholding rules mean

As a passionate value investor it took me a long time (and a lot of research) to accept that momentum is a very important factor that you must incorporate in your investment strategy if you want high returns. Momentum simply works The simple reason is that it works. I summarised the most important points you should know about momentum here: 10 myths about momentum investing, squashed

Following two strong months to start the year, the index was down in March, but still positive overall for 2016. Please check below for more details. Detailed Results The figures for the month are: March return: -5.90% YTD return: 5.16% Below is the chart displaying individual system results throughout March: StateTF March And in tabular format: System March Return YTD Return BBO-20 -3.38% 12.49%