Quantocracy’s Daily Wrap for 04/27/2015

In continuation of an old post on Python, Ive been playing around with an awesome new library built by P. Morissette simply titled BT. It includes numerous functions for back testing and displaying results & charts for daily strategies and lower frequencies. Heres an example of a simple momentum based tactical asset rotation strategy: PythonEx3 It has a function to weight stocks based on

Newfound will be hosting its next monthly strategy review session on Thursday, May 14th from 2:00- 2:30PM EST. Were fortunate enough to have a guest panelist joining us: Brett Hammond from MSCI. He will be discussing factor-based investing and MSCIs portfolio construction methodologies that underlying many of the ETFs Newfound utilizes. Well also be discussing how tactical strategies can

Reader Eli asked in the comments "I used to program in Matlab a lot in the past. Now I feel that Python is a better way to go. Any thoughts? Yes, quite a few – however I also hope to hear some ideas from other readers. Matlab is an excellent tool for analytics, and I have been using it for over a decade now. However if I were starting out in quantitative finance today I would probably go with

Ive never seen a bad backtest Dimitris Melas, head of research at MSCI. About backtests A backtest is a simulation of a trading strategy used to evaluate how effective the strategy might have been if it were traded historically. Backtestesting is used by hedge funds and other researchers to test strategies before real capital is applied. Backtests are valuable because they enable

A rich body of literature has shown that value investing, or buying stocks that are cheap based on a variety of valuation metrics, is robust across different markets. For example, Fama and French (1998) highlighted the value premium across world equity markets. The authors find that value portfolios yield higher average returns than growth portfolios in 12 out of the 13 countries analyzed

#21 – Momentum Effect in Commodities #22 – Term Structure Effect in Commodities Authors: Bakshi, Bakshi, Rossi Title: Understanding the Sources of Risk Underlying the Cross-Section of Commodity Returns Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2589057 Abstract: We show that a model featuring an average commodity factor, a carry factor, and a momentum factor is capable of describing

New 3-part course Fall 2015 I will be offering a 3 part course, CS 7646: Machine Learning for Trading, online. It is equivalent to the on campus graduate course that I teach at Georgia Tech. The three parts are: Part 1: Manipulating Financial Data in Python (about 4 weeks) Part 2: Computational Investing (about 4 weeks) Part 3: Learning Algorithms for Trading (about 7 weeks) Parts 1

No, were not talking resale value here (in which case losing 95% of your original investment is a distinct possibility). We are talking about stock ownership. In a nutshell, the answer is fairly simple: *It is OK to drive a Ford in late summer into fall. But it is NOT OK (apparently) to own Ford stock during late summer into fall. The History In Figure 1 you see the growth of $1,000 invested in

Moving Average Convergence Divergence (MACD) is one of the most popular technical indicators used by traders. It is a flexible indicator that can be used for determining the strength and direction of a trend. It has three distinct features and in this first post we are going to do a high-level analysis of one of those features, the MACD Line. We will compare three of the most common MACD Line sett

One interesting aspect of Fridays action was the discrepancy between the NDX and the SOX. While the NDX rose 1.3%, the SOX declined 1.7% which is very unusual action. Below is an updated study that looks at times the NDX rose by a least 1% while the SOX declined. Six days later 76% of the instances were losers and the average occurrence was nearly a 3% loss. That seems to be a fairly

Note: James Picerno of The Capital Spectator recently did an interesting piece evaluating the Self-Similarity Metric and provides some R code which is valuable for many of our readers. The principle of parsimony relates to being frugal with resources such as money or the use of computing time. It is closely tied to the principles of simplicity, elegance and efficiency. It also complements the phil

On April 21, 2015, the U.S. Department of Justice announced that it would press criminal charges against Mr. Navinder Singh Sarao, a 36-year-old small-time British day-trader. He is being blamed for nothing less than causing the Flash Crash of May 6, 2010, the second largest point swing (1010.14 points) and the biggest one-day point decline (998.5 points) in the history of the Dow Jones