This is a summary of links featured on Quantocracy on Monday, 07/15/2019. To see our most recent links, visit the Quant Mashup. Read on readers!
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Follow up to last week’s Factors Don’t Exist [Two Centuries Investments]In last weeks post, I made a strong assertion that has caused some great feedback and comments. When I first heard Mark Kritzman make a similar point at a UBS conference a few years ago, I had a similar reaction: Hey, Im a quant and I love my factors. They are definitely real!. I still believe that using the ideas that are captured by what we call factors can be done
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The Fed s Driving With A Foot On Each Pedal [Quantifiable Edges]Part of the reason the market has rallied over the past few days is an indication that a rate cut is likely coming as soon as the next Fed meeting. It is interesting timing for the Fed to begin cutting rates, since their QT program still remains in place (though it is winding down). By reducing the SOMA at the same time they are cutting rates, the Fed is basically going to be driving with one foot
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Pathetic Protection via Protective Puts [Alpha Architect]Investors would like to maximize upside participation while mitigating losses. This preference is at the base of the growth of the liquid insurance market in the form of equity index options. The author investigates the following research question: Are protective put options an effective tail hedge? What are the Academic Insights? By testing ( via a real world implementable strategy* and via Monte
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Quantile Regression [Asm Quant]In this post, I would like to quickly introduce what I believe to be an underutilized modelling technique that belongs in most analysts toolkit: the quantile regression model. As I am discussing some of the main points, I will be working with Rs quantreg package that is maintained by the inventor of quantile regression. See link here for more details. To highlight the benefits of building
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Dynamic Spending in Retirement Monte Carlo [Flirting with Models]Many retirement planning analyses rely on Monte Carlo simulations with static assumptions for withdrawals. Incorporating dynamic spending rules can more closely align the simulations with how investors would likely behave during times when the plan looked like it was on a path to failure. Even a modest reduction in withdrawals (e.g. 10%) can have a meaningful impact on reducing failure rates,
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ESG: What is Under the Hood? [Factor Research]The ESG factor generated positive returns since 2011 Strong sector biases (long tech & short discretionary) explain the performance Residual returns from ESG investing are essentially zero INTRODUCTION Investing is complicated as it is simple and complex at the same time. Common advice for new investors is to pursue a buy-and-hold approach for long-term wealth creation. Although this strategy