This is a summary of links featured on Quantocracy on Tuesday, 08/09/2016. To see our most recent links, visit the Quant Mashup. Read on readers!
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Optimal Data Windows for Training a Machine Learning Model for Financial Prediction [Robot Wealth]It would be great if machine learning were as simple as just feeding data to an out-of-the box implementation of some learning algorithm, then standing back and admiring the predictive utility of the output. As anyone who has dabbled in this area will confirm, it is never that simple. We have features to engineer and transform (no trivial task see here and here for an exploration with
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What if Factors Rarely Matter? [EconomPic]Back in December I wrote that It's Generally Smart to Avoid Credit Risk outlining that more than 100% of credit's excess performance over time has come when the level of credit spread was extreme. What if the same were true for well known investment factors? Taking a Look at the Small Cap Premium The chart below takes the average market cap of the 30% largest companies within Fama French
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Can Investors Replicate the Dorsey Wright Focus 5 ETF Strategy? [Alpha Architect]A long-time reader asked that we examine the performance and process associated with the Dorsey Wright Focus Five ETF (ticker: FV). For those who are unfamiliar with the product, FV is a $3B+ sector rotation fund. The fund is designed to provide targeted exposure to five sector- and industry-based ETFs that Dorsey, Wright & Associates (DWA) believes offer the greatest potential to outperform
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Low Vol Advantage Not What You d Expect [Larry Swedroe]One of the problems for the first formal asset pricing model developed by financial economists, the Capital Asset Pricing Model (CAPM), was that it predicted a positive relationship between risk and return. However, empirical studies have found the actual relationship to be flat, or even negative. Over the last 50 years, the most defensive stocks have delivered higher returns than the most