This is a summary of links featured on Quantocracy on Monday, 11/05/2018. To see our most recent links, visit the Quant Mashup. Read on readers!
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Precisely Forecasting Price Ranges with Volatility [Six Figure Investing]Using a tool like Bollinger Bands to forecast future price ranges is a time-honored technique but its calculations are simplified and in some situations flawed. Incorporating the log-normal nature of stock prices into the calculations gives better answers. One greed inducing aspect of volatility is that it enables us to make theoretically sound forecasts about the future. It doesnt matter
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The Problem With Financial Oracles [Mathematical Investor]In recent years, machine learning techniques and big-data facilities have become quite popular in the finance and investment world. In the wake of this success, numerous machine learning researchers have decided to found their own asset management companies, hoping to capitalize on this trend. This begs the question: Are large amounts of data and computing power all that is needed to tame the
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Fund Capacity Analysis: How Much Capital Will a Strategy Handle? [Alpha Architect]The article addresses the estimation of capacity for an equity fund that forms portfolios based on a given investment strategy. It fits within three strands of literature: i) theoretical models of optimal trading or portfolio construction under alpha erosion and trade frictions; ii) empirical estimates of capacity for specific equity strategies; and iii) capacity analysis undertaken within the
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Measuring the Benefit of Diversification [Flirting with Models]The benefits of diversification are often touted, but many investors feel disappointed in diversified portfolios because of the dispersion in performance of the individual holdings. In the context of three different unconstrained sleeves, we look at a way to measure and visualize the benefit (or detriment) of diversification based on achieving different objectives. Through this lens, we get a
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The Odd Factors: Profitability and Investment [Factor Research]The Profitability factor generated attractive returns in the US and Europe since 1990 It is difficult to explain why investors should be compensated for holding highly profitable companies The Investment factor was less attractive and is unusual from a financial analysts perspective INTRODUCTION Discretionary and systematic investors tend to have different perspectives on what works in the
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Midterm Elections Have Not Provided A Reliable Short-Term Market Edge [Quantifiable Edges]Today I decided to look at SPX performance following past mid-term elections. I did not find much that suggested a strong edge. Below is a look at results since 1970 following mid-term elections. 2018-11-04-1 The numbers suggest perhaps a mild inclination for the market to celebrate the results on Wednesday. After that there does not appear to be a strong tendency in either direction. Below
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Historical Returns for US Bonds since 1793 [Quantpedia]We have mentioned it several times – we are quants but we love history and we love research papers like this: Author: McQuarrie Title: The First Eighty Years of the US Bond Market: Investor Total Return from 1793, Combining Federal, Municipal, and Corporate Bonds Link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3260733 Abstract: US securities markets took root after Alexander Hamiltons