Quantocracy’s Daily Wrap for 06/17/2016

My last post, Will bonds deliver crisis alpha in the next crisis?, created quite a stir on the blogosphere. The underlying assumption of the analysis is that stocks are a core component of a portfolio and bonds are included to diversify the portfolio. The key takeaway from my analysis is that the crisis alpha associated with bond exposures seems to be driven by the income component of bond

A common way to describe a mean reversion trade is a rubber band that stretches away and then snaps back. Something that Steve, my trading buddy, and I discuss when a trade keeps going against us is that the rubber band has broken. I have never tested that concept. Meaning after N day sell-off, are we now more likely to continue to sell off than bounce? Doing research is not always about trying to

This post will cover a function to simplify creating Harry Long type rebalancing strategies from SeekingAlpha for interested readers. As Harry Long has stated, most, if not all of his strategies are more for demonstrative purposes rather than actual recommended investments. So, since Harry Long has been posting some more articles on Seeknig Alpha, Ive had a reader or two ask me to analyze his

How fast should individuals plan to grow net worth as they age? To investigate, we examine median levels of household (1) total net worth and (2) net worth excluding home equity from several vintages of U.S. Census Bureau data. We make the following head-of-household age cohort assumptions: Less than 35 years means about age 30. 35 to 44 years means about age 39. 45 to 54 years

In the past 20 years, momentum or trend following strategies have become an established part of the investor toolbox. We introduce a new way of analyzing momentum strategies by looking at the information ratio (IR, average return divided by standard deviation). We calculate the theoretical IR of a momentum strategy, and show that if momentum is mainly due to the positive autocorrelation in