Quantocracy’s Daily Wrap for 08/08/2016

This blog post is available as a PDF here. Summary Over the last year, weve written about how low interest rates and high equity valuations point to a low return rates for traditionally allocated portfolios. In a State Street survey of over 400 institutional investors, the expected return rate for stocks and bonds was 10.0% and 5.5% respectively: significantly higher than we would expect. The

Value has broadly been accepted as an investing style, and historically portfolios formed on cheap valuations outperformed expensive portfolios. But value comes in many flavors, and the factors(s) you choose to measure cheapness can determine your long-term success. In particular, several operating metrics of value, like Earnings and EBITDA, have outperformed the more traditional Price-to-Book

I have generated simulated end-of-day close indicative share values (4:15 PM ET) for VelocityShares' BSWN, LSVX, and XIVH Exchange Traded Notes (ETNs) from March 31st, 2004 through July 14th, 2016. BSWN VelocityShares VIX Tail Risk ETN LSVX VelocityShares VIX Variable Long/Short ETN XIVH VelocityShares VIX Short Volatility Hedged ETN These simulated ETN histories are useful if you want to

The SPDR S&P 500 ETF (SPY) is one of the widely traded ETF products on the market, with around $200Bn in assets and average turnover of just under 200M shares daily. So the likelihood of being able to develop a money-making trading system using publicly available information might appear to be slim-to-none. So, to give ourselves a fighting chance, we will focus on an attempt to predict the

Pairs trading strategys return depends on the divergence/convergence movements of a selected pair of stocks prices. However, if the stable long term relationship of the stocks changes, price will not converge and the trade opened after divergence will close with losses. We propose a new model that, including companies fundamental variables that measure idiosyncratic factors, anticipates