This is a summary of links featured on Quantocracy on Tuesday, 08/08/2017. To see our most recent links, visit the Quant Mashup. Read on readers!
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Exploring Our Scraped Options Data Bid-Ask Spreads [Black Arbs]Compared to the equity market, the options market is a level up in complexity. For each symbol there are multiple expiration dates, strike prices for each expiration date, implied volatilities, and that's before we get to the option greeks. The increased complexity presents us with more opportunity. More complexity means less ground truth, more errors, more gaps, and more structural
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Volatility Premium, Covered Call Selling, and Knowing What You Own [Alpha Architect]The folks at AQR are top-notch researchers and have written a ton of great papers. Some of their more famous papers are the following: Value and Momentum Everywhere A Century of Evidence on Trend Following Size Matters If you Control Your Junk (my favorite title of any paper ever published) In this post, I wanted to highlight a number of lesser known papers by the fine folks at AQR that deal with
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Visualizing Tail Risk [Eran Raviv]Tail risk conventionally refers to the risk of a large and sharp draw down of the portfolio. How large is subjective and depends on how you define what is a tail. A lot of research is directed towards having a good estimate of the tail risk. Some fairly new research also now indicates that investors perceive tail risk to be a stand-alone risk to be compensated for, rather than bundled together
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Trend Following 140 Years of Data Supports its Value [Wisdom Trading]AQR updates it paper on Trend Following performance over the last century. Despite the strategy experiencing poor recent performance, it brings tremendous value to stock and bond portfolios over time by 1) increasing returns and 2) lowering volatility and max loss. A win-win-win in my book. Trend Following aint perfect. No investment strategy is, but the data proves Trend Followings