Quantocracy’s Daily Wrap for 08/07/2015

In their groundbreaking paper, Digesting Anomalies: An Investment Approach, Kewei Hou, Chen Xue and Lu Zhang proposed a new four-factor asset pricing model that goes a long way toward explaining many of the anomalies neither the Fama-French three-factor nor subsequent four-factor models could explain. The study, which was published in the March 2015 issue of The Review of

Pinto, Henry, Robinson and Stowe (2010) define momentum indicators as valuation indicators that are based on the relationship between price or another fundamental, earnings for example, to a time series of its historical performance or to the fundamentals expected future performance values. When the strategy uses earnings then it is an earnings momentum strategy and in the case of usin

As we have made clear in the past, we are fascinated by the economics of open source software. This business model makes sense for massively scalable and ubiquitous bits of technology, but surely it must be anathema to the closed world of trading, right? This has an intuitive appeal, we know of people that have made millions off of the information acquired overhearing conve

Introduction I have the privilege of working with two of the sharpest minds in the industry. Last week I had a discussion with them via email about selecting a suitable benchmark for the strategies I run. I was specifically questioning them on the use of cash returns as a benchmark. This is a contentious issue in the industry – many folk disagree with cash as a benchmark be

This brief post will serve as the coup de grace for our Junkie Market series. By that, we are referring to days on which there are numerous (in this case, at least 100) new 52-Week Highs AND 52-Week Lows. We have covered such occurrences on the NYSE and the Nasdaq exchanges. If youll recall, these events tended to pop up near cyclical market tops. Thus, the forward returns in t