Quantocracy’s Daily Wrap for 05/27/2015

The post ETF Sector Rotation generated some good ideas on what to try differently. This post will focus on two ideas on the Select Sector SPDR ETFs. The next post will look at two ideas using Fidelity sector mutual funds. ETF Universe These tests will use the Select Sector SPDR ETFs. The list is Consumer Discretionary (XLY) Consumer S

Having explored the history of the price-to-book ratio, we can now turn to its usefulness as a stock selection criterion. The data suggests a few important points about the price-to-book ratio: It has worked quite nicely in small-cap It has not worked as well in large-cap stocks Price-to-book delivers the best returns when it is used to compare each

Momentum has been found to be a persistent and pervasive factor in the returns not only of stocks, but of other asset classes (including bonds, commodities and currencies). Compared with the market, value and size risk factors, momentum in equities has earned both the highest premium and the highest Sharpe ratio. However, momentum has also experienced the wor

The study below is one I have shown here on the blog for a long time. It looks at relatively sharp selloffs from intermediate-term highs. It shows that there has been a strong tendency for situations like the current one to bounce. Results are updated. The stats all suggest an upside edge over the next 1-5 days. Traders may want to keep this in mind the next few days. Want research like this

Benjamin Graham, father of value investing, once said: in the short run, the market is like a voting machine but in the long run, it is a weighing machine. The psychology factor that can dominate market returns and volatility in the short-run is often washed out in long-run annualized returns, which is dominated by economic and valuation factors. While valuations may ser

Weve spent a good deal of ink over the past few months on the trendless, range-bound action that has characterized the U.S. stock market recently. This trading range has been, after all, the dominant factor in the equity market. And an epic, even record-setting, trading range it has been. Our expectations based on much of the research weve done has been that once the market br

First the (potential) good news. The (potential) good news is that one trend in bonds that I wrote about a while back here and here may finally (potentially) be playing out the right way. Although, as there are still three more trading days left in the month of May, it is clearly a little early to declare victory. In any event, the trend I am referring to is the histo