Quantocracy’s Daily Wrap for 08/23/2017

A common question asked in the factor investing field is the following how much of the models performance is driven by sector allocations, and how much is driven by security selection? Our answer is to simply buy Value stocks or Momentum stocks, regardless of sector constraints. Why? Well a nice anecdote (but not data) is that investing in cheap technology stocks was not a great

Several readers asked for additional tests to be done on the strategy on Sector trading using the 200-day moving average. We will be testing allocated 11% per ETF instead of 10%, using asymmetric number of days and adding IEF to the SPY MA200 10 day test. SPY MA200 10 day Buy Rule: Buy SPY when it is above the 200-day MA for 10 or more days. Sell IEF. Sell Rule: Sell SPY when it is below the

Guest: Corey Hoffstein. Corey is the founder and CIO of Newfound Research. Hes a frequent speaker on industry panels and contributes to ETF.com, ETF Trends, and Forbes.coms Great Speculations blog. He was named a 2014 ETF All Star by ETF.com. Corey holds a Master of Science in Computational Finance from Carnegie Mellon University and a Bachelor of Science in Computer Science, cum laude, from

Traders often debate whether short out-of-the-money (OTM) or at-the-money (ATM) puts are riskier. The argument for OTM put options being riskier is that their Speeds (or dGamma/dspot) are higher than the ATMs ones, thus the Gamma, which is negative, can increase (in absolute value) substantially during a market downturn. In this post, we will quantify and compare the risks of short OTM and ATM

In this post, I want to explain the intuition behind some famous theorems in mathematical finance. I will not explain any proofs, since you can find these in books, but rather for what the theorems can be used. Girsanovs theorem Let us start with Girsanovs theorem. We need a Brownian motion Wt under measure P, and a sufficiently reasonable function v. Then there is an equivalent