This is a summary of links featured on Quantocracy on Monday, 08/13/2018. To see our most recent links, visit the Quant Mashup. Read on readers!
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Robustness in Quantitative Research and Trading [Jonathan Kinlay]One of the most highly desired properties of any financial model or investment strategy, by investors and managers alike, is robustness. I would define robustness as the ability of the strategy to deliver a consistent results across a wide range of market conditions. It, of course, by no means the only desirable property investing in Treasury bills is also a pretty robust strategy, although
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Factor Exposure: Smart Beta ETFs vs Mutual Funds [Factor Research]Investors can express factor views via smart beta ETFs or mutual funds Some mutual funds offer higher factor exposure than smart beta ETFs Given higher fees, strong views on expected factor performance are required INTRODUCTION Similar to wind and water eroding the strongest mountains over time, passive fund management has been gradually capturing market share from active managers globally. The
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Modeling Asset Volatility [Jonathan Kinlay]I am planning a series of posts on the subject of asset volatility and option pricing and thought I would begin with a survey of some of the central ideas. The attached presentation on Modeling Asset Volatility sets out the foundation for a number of key concepts and the basis for the research to follow. Perhaps the most important feature of volatility is that it is stochastic rather than
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Macro Conditions May Enhance Short-term Predictability of the Shiller P/E [Alpha Architect]Is there a relationship between real yields and short-term market valuation? Is there a relationship between inflation rates and short-term market valuation? Does the predictive power of the Shiller P/E improve by using yields and inflation? What are the Academic Insights? YES. The authors describe a mountain-shaped relationship between stock market valuations and inflation rates and real
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The Law of Large Numbers – Practical Statistics for Algo Traders Part 2 [Robot Wealth]Even if youve never heard of it, the Law of Large Numbers is something that you understand intuitively, and probably employ in one form or another on an almost daily basis. But human nature is such that we sometimes apply it poorly, often to great detriment. Interestingly, psychologists found strong evidence that, despite the intuitiveness and simplicity of the law, humans make systematic
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Pullbacks Heading Into Opex Week [Quantifiable Edges]Opex week often carries some bullish seasonality. Pullbacks into strong seasonal periods will often offer substantial edges. The study below utilizes this concept and examines pullbacks of at least 3 days just prior to opex week. 2018-08-12-1 Numbers here are strong, and suggest a possible upside edge. Of course, August opex week has NOT been great. (Click here to see opex week broken down by