This is a summary of links featured on Quantocracy on Wednesday, 07/29/2015. To see our most recent links, visit the Quant Mashup. Read on readers!
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Synchronicity [MKTSTK]Recently we read an excellent article on investing from Alpha Architect entitled One way to beat the market? Be different! In the article, the author shows how thinking differently from the pack can provide better performance for your investment portfolio. As often happens with lateral thinking, this article stimulated our thinking from an HFT point of view. How can thinkin
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Trading the VIX over the Fed Announcement [Factor Wave]"Buy the rumor, sell the fact" is an over-used phrase traders say to describe the way the equity markets get excited by future events then lose steam when the event actually happens. Because the VIX is strongly negatively correlated with the equity markets, this could be changed to "sell the VIX before an event, buy it afterwards". In this case the event is the Fed
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The Information from Insiders [Factor Wave]One of the things that everyone knows to be true is that the trades of company insiders convey valuable information. But is this really true? And are some types of trades more informative than others? If you can get hold of the relevant data, this is the sort of question that is very amenable to statistical analysis. David Cicero and Babajide Wintoki did this exercise in
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Dynamic Markowitz Efficient Frontier [Quant Dare]Markowitz Model is a famous method allocated in the Portfolio Investment Theory. This model provides efficient portfolios, i.e. portfolios with the highest rentability and lowest risk possible through mathematical programming. The set of portfolios composes the efficient frontier. The strategy is based on cuadratic optimization minimazing the estimated risk and opposite rentability. The
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Australia All Ords Steady Vol Strategy [John Orford]In a round about way from New York to Singapore, I landed in Oz in 2012. It was like walking into a pre '08 New York or Ireland with funnier accents. They call '08 the 'GFC' or the 'Global Financial Crisis' and talk about it in a sort of detached way – because that tidal wave never hit their shores. In any case, the 'Volatility Fighter' reminded me
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Algorithm Aversion – Why people don’t follow the model! [Alpha Architect]There are many studies showing that models beat experts, including the meta-study Clinical versus mechanical prediction: A meta-analysis by Grove et al. (2000). However, given this knowledge that models beat experts, forecasters still prefer to use the human (expert) prediction as opposed to using the model. Why is this? A recent paper by Dietvor
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Simple volatility rebalancing strategy [Volatility Fighter]In my posts, I often mention a volatility rebalancing strategy. Originally, this strategy supposed to rebalance a portfolio daily to local volatility measured by standard deviation. I strongly suspect, that a common retail investor will stop trying to understand this strategy right after words "standard deviation", so I propose a simplified version of this strategy. My purp