Quantocracy’s Daily Wrap for 09/17/2018

This post will investigate using Principal Components as part of a momentum strategy. Recently, I ran across a post from David Varadi that I thought Id further investigate and translate into code I can explicitly display (as David Varadi doesnt). Of course, as David Varadi is a quantitative research director with whom Ive done good work with in the past, I find that trying to investigate

A primer on beta convexity and its applications is given in the following post: The essential idea is to evaluate the beta of stock during down-markets, separately from periods when the market is performing well. Beta convexity is a measure of how stable a stock beta is across market regimes, and by choosing a portfolio of stocks with low beta-convexity we seek to stabilize the overall risk

The paper investigates the following research question: What has the absolute risk behavior of leveraged products been historically? Did they behave as intended by design? Is the leverage multiple a reliable indicator of the volatility multiple? Is the leverage multiple a reliable indicator over shorter horizons? What are the Academic Insights? By studying the empirical evidence of the top 10

Our whitepaper The Optimization Machine: A General Framework for Portfolio Choice presented a logical framework for thinking about portfolio optimization given specific assumptions regarding expected relationships between risk and return. We explored the fundamental roots of common portfolio weighting mechanisms, such as market cap and equal weighting, and discussed the rationale for several

Trend-following strategies exploit the fact that investors exhibit behavioral biases that cause trends to persist. While many investment strategies have a concave payoff profile that reaps small rewards at the risk of large losses, trend-following strategies exhibit a convex payoff profile, one that pays small premiums with the potential of a large reward. By implementing a trend-following

Short-term momentum persists in common equity factors The persistence is strong in Value and Dividend Yield However, these results conflict with short-term mean-reversion on equity index level INTRODUCTION When Trump won the US presidential election in November 2016, small and cheap stocks started rallying, which surprised most investors as the consensus was a risk-off positioning. As new trends

This post has two goals. I hope to make you think about your graphics, and think about the future of data-visualization. An example is given using some simulated time series data. A very quick read. In visualization, like in programming, presenting or any other skill, there is much to learn. Also like in other skills, there is no one best way of doing things. Rather, creating a good chart is

One indicator that has gotten some play in the news lately is the Hindenburg Omen. In last weekends subscriber letter I discussed the Hindenburg Omen signal in detail. (Click here for a free trial.) A core premise behind the Hindenburg Omen is that there are a large number of stocks hitting both new highs and new lows. This indicates a split market. When this has happened for multiple days

A late edition of the State of Trend Following report, showing a strong return for August and a YTD figure back in the black. Please check below for more details. Detailed Results The figures for the month are: August return: 6.74% YTD return: 3.36% Below is the chart displaying individual system results throughout August: StateTF August And in tabular format: System August Return YTD Return