This is a summary of links featured on Quantocracy on Wednesday, 07/27/2016. To see our most recent links, visit the Quant Mashup. Read on readers!
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The Unbearable Transience of Alpha [Quandl]In 2004 I enjoyed my 15 minutes of fame for an article I wrote called The Tao of Alpha, in which I explained the concept of alpha as a zero-sum game. Sources of alpha in 2004 were much different than those available in the mid-1990s when I started my career and they are also different from todays. Alpha is highly transient and has been coming and going for as long as capital markets have
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Pair Trading Strategy and Backtesting using Quantstrat [Quant Insti]One of my favorite classes during EPAT was the one on statistical arbitrage, so the pair trading strategy seemed a nice idea for me. My strategy triggers new orders when the pair ratio of the prices of the stocks diverge from the mean. But in order to work, we first have to test for the pair to be cointegrated. If the pair ratio is cointegrated, the ratio is mean-reverting and the greater the
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Evidence-Based Investing Requires Less Religion and More Reason [Alpha Architect]During the 1600s, the Dutch had a large merchant fleet and the port city of Amsterdam was a dominant commercial hub for trade from around the world. Based on the growing influence of the Dutch Republic, in 1602 the Dutch East India Company was founded, and its evolution into the first publicly traded global corporation drove a number of financial innovations to the Amsterdam Stock Exchange,