This is a summary of links featured on Quantocracy on Monday, 10/09/2023. To see our most recent links, visit the Quant Mashup. Read on readers!
-
How to measure the quality of a trading signal [SR SV]The quality of a trading signal depends on its ability to predict future target returns and to generate material economic value when applied to positioning. Statistical metrics of these two properties are related but not identical. Empirical evidence must support both. Moreover, there are alternative criteria for predictive power and economic trading value, which are summarized in this post. The
-
The ESG-efficient frontier (Part II) [Quantifying ESG]In the previous week, we looked at the first part of a paper by AQRs Lasse H Pedersen, Shaun Fitzgibbons and Lukasz Pomorski. This remains an influential paper in that it contains some really useful ideas on how to incorporate ESG in a portfolio optimization problem. You can read the first part here. Just to summarize, in Part I we covered the theory behind the ESG-efficient frontier, which is
-
Building Better High Yield Portfolios [Finominal]There is an inverse relationship between yield and total return The ideal yield strategy has a high yield, high Sharpe, and low correlation to stocks The yield-to-downside beta ratio enhances the strategy selection process INTRODUCTION @ChatGPT: What is a rhyme that includes high dividends are for suckers? @Nicolas: Im happy to help with rhymes, but its important to note that