Quantocracy’s Daily Wrap for 05/26/2020

As a quant, I have been obsessed with systematic Value and Momentum since the first day I ran a backtest. Part of me knows that the future for this combo is unlikely to be as good as the past. In my R&D, I moved on to other factors more than a decade ago. But another part of me is still in love with the magical duo and wishes for them to survive. Value and Momentum have been the most beautiful

With the current market conditions and the wild ride weve all been on, weve pivoted our attention to focus on supplying academic research on responding to a crisis. This article investigates what the appropriate tactical adjustments investors should consider when making changes to their portfolio holdings following large losses in wealth during a crisis. What are the Academic Insights? In a

Developing a trading strategy from start to finish is a complex process. The process follows the following steps: Formulation of the strategy Write Pseudo Code Transform into working code Start first backtests Optimize Evaluate test results Go live Monitor performance Evaluate and adjust Optimization process We will discuss each of this points separately. Here is a visualization of the design

Tactical investing aims to deliver better risk-adjusted returns and/or reduced drawdowns Tactical ETFs have not achieved either objective in recent years It is challenging to explain the consistent underperformance across different types of tactical ETFs INTRODUCTION Every investor is a tactician, whether they actively try or not. Warren Buffett and his lieutenants at Berkshire Hathaway pursue a

One way we can quantify a stocks movement relative to the market index is by calculating its beta to the market. To calculate the beta of MSFT to SPY (for example) we: calculate daily MSFT returns and daily SPY returns align the returns with one another regress MSFT returns against SPY returns. This shows the procedure, graphically: