This is a summary of links featured on Quantocracy on Tuesday, 06/29/2021. To see our most recent links, visit the Quant Mashup. Read on readers!
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Distance Approach in Pairs Trading: Part I [Hudson and Thames]There are many types of approaches you can use in pairs trading, but the Distance Approach is one of the most widely used because of its simplicity. The basic concept is as follows: Using Euclidean squared distance on the normalized price time series, n closest pairs of assets are chosen as pairs. S S D=sum_{t=1}^{N}left(P_{t}^{1}-P_{t}^{2}right)^{2} Then, with selected pairs, if the difference
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Static optimisation of the best set of instruments to hold in a futures trading system [Investment Idiocy]In a couple of recent posts (here and here) I explored the idea of using dynamic optimisation to deal with the following problem: diversification across markets is good, but requires more capital. That didn't work out so well! I can also appreciate that this is *way* beyond most peoples idea of a simple trend following system. And it flies in the face of much I've said in terms of
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Is Zorro project worth trying for algorithmic trading? [Trading Enigma]The online trading platform is growing bigger day by day. More people are entering this industry, and they are trying to come up with unique trading strategies. But automated trading has taken the industry by storm. Automated trading is the best thing an independent trader can ask for. But implementing an automated trading strategy is one big task. It requires deep market research and a lot of
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Can Investors Beat Active Mutual Funds with Cheap ETFs, YUP! [Alpha Architect]The research (and the theory) has convincingly shown that mutual funds should and do underperform a passive index by an amount approximately equal to fees. However, no one has actually tried to construct the active mutual fund dominating passive strategy using commercially available products. It seems like such an obvious test. This study is designed to answer that question on a practical basis.