This is a summary of links featured on Quantocracy on Tuesday, 08/23/2022. To see our most recent links, visit the Quant Mashup. Read on readers!
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Probabilistic programming in finance: a robust Sharpe ratio estimate [Artifact Research]In this post, we will develop a time-varying, probabilistic extension of the Sharpe ratio as a widely used performance metric for financial assets. In particular, we devise a Bayesian regime-switching model to capture different market conditions and infer the full distribution the Sharpe ratio as it changes over time using the probabilistic programming framework bayesloop. We show that by focusing
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Forecasting Market Indices Using Stacked Autoencoders and LSTM [Jonathan Kinlay]The stem paper for this post is: Bao W, Yue J, Rao Y (2017) A deep learning framework for financial time series using stacked autoencoders and long-short term memory. PLoS ONE 12(7): e0180944. https://doi.org/10.1371/journal.pone.0180944 The chief claim by the researchers is that 90% to 95% 1-day ahead forecast accuracy can be achieved for a selection of market indices, including the S&P500
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Long Volatility versus Tactical Asset Allocation [Factor Research]Long volatility strategies are attractive diversifiers, but complex and not easily accessible Tactical asset allocation for equities may be considered as an alternative There is no clear winner between these two options INTRODUCTION Risk management in portfolio construction is primarily achieved via diversification or rules-based frameworks. The former simply means combining asset classes that
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Is Relative Sentiment an Anomaly? [Alpha Architect]Relative sentiment is an indicator that measures the positions, flows, and attitudes of institutional investors compared to those of individual investorswhere institutions typically consist of large asset managers, insurance companies, pension funds, and endowments. In some instances, howeverdepending on the dataset and the asset class under considerationinstitutions might also include