This is a summary of links featured on Quantocracy on Tuesday, 07/09/2019. To see our most recent links, visit the Quant Mashup. Read on readers!
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Building a Risk Control Index with Drawdown Protection (Part 1) [CSS Analytics]Both trend-following and absolute momentum are well established methods for managing risk. Another method for managing risk is to use volatility targeting. The former are superior for reducing large drawdowns in bear markets while the latter tends to reduce kurtosis by normalizing the daily bet size. The combination of the two tends to increase the sharpe ratio while generally reducing both
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Fact, Fiction, and the Size Effect [Alpha Architect]The size effect is the phenomenon in which small stocks (i.e., those with lower market capitalizations), on average, outperform large stocks (i.e., those with higher market caps) over time. The size effect was first documented by several academic papers in the early 1980s ( Banz, 1981). However, it remains one of the most debated market anomalies among scholars. See here, here, and here some