This is a summary of links featured on Quantocracy on Tuesday, 09/20/2016. To see our most recent links, visit the Quant Mashup. Read on readers!
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The Promise of Computing [Turing Finance]You would be forgiven for thinking that Moore's law is a law like Newton's laws. It really does seem that as surely as an apple will fall to the ground, so too shall our computers, phones, tablets, and (now) watches capacity increase year-after-year at an exponential rate … but Moore's law is not a law, it is the promise of computing. And it is the kind of promise that is hard to
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Extreme Value Theory [Eran Raviv]Extreme Value Theory (EVT) is busy with understanding the behavior of the distribution, in the extremes. The extreme determine the average, not the reverse. If you understand the extreme, the average follows. But, getting the extreme right is extremely difficult. By construction, you have very few data points. By way of contradiction, if you have many data points then it is not the extreme you are
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How Dumb Money and Smart Money Drive Stock Market Anomalies [Alpha Architect]Stock market anomalies behave in mysterious ways. Over long periods of time they can provide expected outperformance versus passive indexes, but in the short run they can experience bouts of gut-wrenching underperformance (e.g., value and momentum). What accounts for this sporadic performance and these tantrum-like swings? As with other difficult questions, academic research has provided some
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Momentum & Value vs. Growth & Value [Systematic Relative Strength]At Dorsey Wright, we believe momentum can be used as a stand-alone investment strategy, however, combining it with other smart beta factors to which momentum is negatively correlated has its advantages. We have referenced this in previous blog posts, noting that it allows for a portfolio to capture alpha at different periods of the market cycle, which in turn can reduce both drawdowns and