This is a summary of links featured on Quantocracy on Monday, 10/28/2019. To see our most recent links, visit the Quant Mashup. Read on readers!
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The Edge of an Entry Signal [Philipp Kahler]When developing a new trading strategy you are usually confronted with multiple tasks: Design the entry, design the exit and design position sizing and overall risk control. This article is about how you can test the edge of your entry signal before thinking about your exit strategy. The results of these tests will guide you to the perfect exit for the tested entry signal (entry-exit combination)
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Factor Orphans [Flirting with Models]To generate returns that are different than the market, we must adopt a positioning that is different than the market. With the increasing adoption of systematic factor portfolios, we explore whether an anti-factor stance can generate contrarian-based profits. Specifically, we explore the idea of factor orphans: stocks that are not included in any factor portfolio at a given time. To identify
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Tradable economics [SR SV]Tradable economics is a technology for building systematic trading strategies based on economic data. Economic data are statistics that unlike market prices directly inform on economic activity. Tradable economics is not a zero-sum game. Trading profits are ultimately paid out of the economic gains from a faster and smoother alignment of market prices with economic conditions. Hence,
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The Complexity of Factor Exposure Analysis [Factor Research]Factor exposure analysis is essential for performance and risk contribution However, the results vary depending on methodologies, factor definitions, and other assumptions A holdings-based approach is preferable over regression analysis INTRODUCTION A large part of a capital allocators job is to be a detective and solve puzzles. A never-ending puzzle is explaining past performance and risk