This is a summary of links featured on Quantocracy on Monday, 11/06/2023. To see our most recent links, visit the Quant Mashup. Read on readers!
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NEW CONTRIBUTOR: Improving Trend With Mean Reversion [Return Sources]In a 2011 paper, To Trade or Not to Trade? Informed Trading with Short-Term Signals for Long-Term Investors, Roni Israelov discusses how investors could use short-term trading signals that are normally too costly to trade, such as short-term reversal. He describes using the short-term signal as a filter to some longer-term signal, and only trading when both signals agree. Heres a very
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Using Exponentially Weighted Moving Averages to navigate trade-offs in systematic trading [Robot Wealth]A big part of the job of the indie trader is data analysis. Were always looking in the past data to validate (or more often, invalidate) a hypothesis about what might predict future returns. And one could argue that recent data is more useful than past data, since it may reflect the current state of affairs more accurately. Or it might not market data are inherently noisy, and so theres
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Sovereign debt sustainability and CDS returns [SR SV]Selling protection through credit default swaps is akin to writing put options on sovereign default. Together with tenuous market liquidity, this explains the negative skew and heavy fat tails of generic CDS (short protection or long credit) returns. Since default risk depends critically on sovereign debt dynamics, point-in-time metrics of general government debt sustainability for given market
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Organization Capital and the Cross-Section of Expected Returns [Alpha Architect]This paper focuses on organization capital, representing intangible assets in a firms key employees that is not captured by classic value measures such as book-to-market. The authors propose a structural model to analyze the impact of organizational capital on asset prices and argue that shareholders perceive firms with high levels of organizational capital to be riskier than those with
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CLOs – Diversifier, or another Equity Clone? [Finominal]Multiple collateralized loan obligation (CLO) ETFs have been launched since 2020 CLOs are promoted as low-risk fixed-income products However, these simply represent diluted equity exposure and offer limited diversification benefits INTRODUCTION The U.S. leveraged loan market has increased from $100 billion in 2000 to $1.4 trillion in 2022, according to data from S&P Global, which is remarkable
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Technology Spillover Impacts Stock Returns [Alpha Architect]The increasing role of intangible assets compared to physical assets in our economy has been accompanied by increased research into their impact on asset prices and returns. Studies such as the 2020 papers Explaining the Recent Failure of Value Investing, Intangible Capital and the Value Factor: Has Your Value Definition Just Expired?, and Equity Investing in the Age of