This is a summary of links featured on Quantocracy on Friday, 09/30/2016. To see our most recent links, visit the Quant Mashup. Read on readers!
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Really, Beware of Low Frequency Data [EP Chan]I wrote in a previous article about why we should backtest even end-of-day (daily) strategies with intraday quote data. Otherwise, the performance of such strategies can be inflated. Here is another brilliant example that I came across recently. Consider the oil futures ETF USO and its evil twin, the inverse oil futures ETF DNO*. In theory, if USO has a daily return of x%, DNO will have a daily
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Buyback Bulls and Bears [Investing Research]A lot of attention has been paid to share repurchases recently, which makes sense given the amount of money involved. As of June 30th, 2016, there had been almost $450 billion net transferred from companies to shareholders over the trailing twelve months through repurchase programs, very close to the all-time high in March of 2008. Transferring that much wealth between stakeholders will garner
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Research Review | 30 Sep 2016 | Managing Volatility Risk [Capital Spectator]Managed portfolios that take less risk when volatility is high produce large alphas, substantially increase factor Sharpe ratios, and produce large utility gains for mean-variance investors. We document this for the market, value, momentum, profitability, return on equity, and investment factors in equities, as well as the currency carry trade. Volatility timing increases Sharpe ratios because
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Option Pricing Methods in the Late 19th Century [Quantpedia]This paper examines option pricing methods used by investors in the late 19th century. Based on the book called PUT-AND-CALL written by Leonard R. Higgins in 1896 and published in 1906 it is shown that investors in that period used routinely the put-call parity for option conversion and static replication of option positions, and had developed no-arbitrage pricing formulas for determining
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Sell Rosh Hashanah, Buy Yom Kippur [UK Stock Market Almanac]In 1935, the Pennsylvania Mirror referred to a Wall Street adage, Sell before Rosh Hashanah; buy before Yom Kippur. Recently an academic paper quoted this article and set out to establish if the adage was true and still valid today. The theory is that the market is weak during the approximately seven trading-days gap between the Jewish New Year (Rosh Hashanah ) and the Day of Atonement (Yom