Quantocracy’s Daily Wrap for 09/16/2022

This is a test of concepts from the paper Cross-Asset Signals and Time Series Momentum. Standard time series momentum is a well-documented feature of financial markets. Assets going up tend to continue going up. In this paper, the authors show that stocks and treasuries can be used to time each other. This is cross-asset momentum. Treasury momentum is a positive predictor of stock

The Sharpe ratio1 is one of the most commonly used measure of financial portfolio performance, but because it is deeply rooted in mean-variance theory, its usage with return distributions deviating from normality (e.g. hedge funds, cryptocurrencies) is frequently questioned2. One solution to this issue is to switch to a probabilistic framework, under which the Sharpe ratio computed from a finite

I am drawn to ETF rotation strategies. What likely draws me to them is that in general, these are simple strategies that do not trade that often. My goal with these strategies is to match buy and hold with less drawdown. What follows is a strategy I have known about for a while and tested but never written about. The Concept From a set of ETFs, select the one to three that have had the best

Imagine youre a quantitative long-short equities trader. If you can predict which stocks will have above-average returns next period and which will have below-average returns, then you can profit by buying the winners and selling short the losers. Return predictability and trading profits are two sides of the same coin. Your entire job boils down to solving this classification problem. Ideally,

The objective of research into asset pricing is to determine which characteristics are most important for predicting returns and then build simplified models using as few factors as possibleto tame the so-called zoo of factorswhile still providing a high level of explanatory power. In recent years we have seen heightened interest in the ability of the duration of equity cash