This is a summary of links featured on Quantocracy on Wednesday, 10/21/2015. To see our most recent links, visit the Quant Mashup. Read on readers!
-
How well can you scale your strategy? [QuantStrat TradeR]This post will deal with a quick, finger in the air way of seeing how well a strategy scalesnamely, how sensitive it is to latency between signal and execution, using a simple volatility trading strategy as an example. The signal will be the VIX/VXV ratio trading VXX and XIV, an idea I got from Volatility Made Simples amazing blog, particularly this post. The three signals compared will be
-
Stock Volatility Moves Treasurys [Larry Swedroe]Understanding the volatility of Treasury bond returns, as well as the volatility of both the level and slope of the Treasury term-structure, are fundamental issues in finance. Whats more, they have important implications for investors and portfolio design. Researchers have offered both theory and empirical evidence that suggest important linkages between equity risk and the Treasury bond
-
Utilizing the Value of Value to Make Value / Growth Tilts [EconomPic]Back in August I outlined why I thought the plain-vanilla value premium had been compressed to the point growth had and was likely to continue to outperform in my post Death of (Plain Vanilla) Value – Long Live GARP. This post is meant as a follow up and suggests a few frameworks as to how an investor might allocate based on the given "value of value". Backdrop: Value of Value Matters
-
Sir Bayes: all but not na ve! [Quant Dare]Is it possible to classify and predict (yes, predict!) if market trends will be bullish, bear or ranged by using a method called nave and based on something as simple as Bayes theorem is? Lets see! Predicting trends with nave Bayesian classifier Our main objective is to explore techniques of machine learning that can help us not only to label series in a posteriori analysis, but
-
Information Ratio Hypothesis Testing [John Orford]Spurned by reading an account of a trader who swears by machine learning, few days ago I wrote about aesthetics in finance. Maths and tech without a narrative is pointless. My own attempts at providing a narrative foundered a few months back. Suspend Your Disbelief! I started using the Sharpe as a hypothesis test. So for example, the S&P 500 (not including dividends) has a Sharpe of ~0.462
-
Insider Trading During the 8-K Trading Gap [Alpha Architect]SEC rules allow companies to delay the public disclosure of significant corporate events for up to 4 business days. This information is reported on an 8-K. This 4-day gap between an event and the disclosure creates an interesting situation. As an insider, if I know an 8-K is going to report news, I may want to try and trade in that 4 day window when the information is not available to the broader
-
Biotech: My love-hate relationship [Alvarez Quant Trading]The two charts above are from recent trades I have taken. Charts created in AmiBroker. On July 20, 2015 IBB, iShares Nasdaq Biotechnology ETF, made a closing high of 398. About three months later it closed at 289 for 27% loss. A very common thing I hear from traders is that they dont trade biotechnology or pharmaceutical stocks. I completely understand. These stocks tend to be very