Quantocracy’s Daily Wrap for 06/09/2015

We know that markets overdo it at extremes. At the market level, we call these bubbles or manias, panics or crashes. At the stock level, we call them glamour and value. Lets collect some lessons from the best performing stocks from the two categories where investors have the most extreme (good or bad) expectations for the futurevalue and glamour stocks. A quick definition

What are the most pressing systematic weaknesses in financial research, and how should the investment community address them? In the May 2015 version of his article entitled The Future of Empirical Finance, Marcos Lopez de Prado identifies three major problems in empirical finance and proposes ways to mitigate them. Based on his experience and common sense arguments and references

This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and Ill send you a free copy. – I believe in the discipline of mastering the best that other people have ever figured out. I dont believe in just sitting there and trying to dream it up all yourself. Nobodys that smart.

This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and Ill send you a free copy. – Warren Buffett mentioned asset allocation instructions for his trust in his 2013 shareholder letter: What I advise here is essentially identical to certain instructions Ive laid o

This excerpt is from the book Global Asset Allocation now available on Amazon as an eBook. If you promise to write a review, go here and Ill send you a free copy. – Because for any given level of return, if you diversify, you can generate that return with a lower risk; or for any given level of risk, if you diversify, you can generate a higher return. So

Last time I had a look at the Vix's returns plotted against each other with a quarter lag. Now I am doing the same with the S&P 500. Whereas the Vix's returns were mostly found in the bottom left corner and reflected positive skew, I promised equities would be in the top right and imply negative skew. The S&P 500 however is fairly centred, the larg

The Utilities Divergence $XLU

This post looks at a standard (STD) one-lot iron condor on the Russell 2000 Index (RUT), initiated at 52 days-to-expiration (DTE). The results in this post were derived from approximately 3200 individual trades entered by the backtester. For background on the setup for the backtests, as well as the nomenclature used in the charts and tables below, please see the introducto

Working Your Tail Off: Active Strategies vs. Direct Hedging