This is a summary of links featured on Quantocracy on Saturday, 04/13/2024. To see our most recent links, visit the Quant Mashup. Read on readers!
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Use Markov models to detect regime changes [PyQuant News]Its rumored that Renaissance Technologies uses hidden Markov models in their trading. In fact, the Baum-Welch algorithm used with Markov models was partially invented by Leonard Baum who would help found RenTec. In todays newsletter, well look an example of using a Markov model to detect regime changes in the equities market. Lets go! Use Markov models to detect regime changes A Hidden
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Research Review | 12 April 2024 | Equity Risk Premium [Capital Spectator]Macroeconomic Announcement Premium Hengjie Ai (University of Wisconsin-Madison), et al. November 2023 The paper reviews the evidence on the macroeconomic announcement premium and its implications on equilibrium asset pricing models. Empirically, a large fraction of the equity market risk premium is realized on a small number of trading days with significant macroeconomic announcements. We review
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Minimizing the Risk of Cross-Sectional Momentum Crashes [Alpha Architect]While empirical research on cross-sectional (long-short) momentum has shown high returns, investors have also experienced huge drawdownsmomentum exhibits both high kurtosis and negative skewness. Since 1926, there have been several momentum crashes that featured short but persistent periods of highly negative returns. For example, from June to August 1932, the momentum portfolio lost about 91%,