This is a summary of links featured on Quantocracy on Wednesday, 11/11/2015. To see our most recent links, visit the Quant Mashup. Read on readers!
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Correlation and correlation structure (3), estimate tail dependence using regression [Eran Raviv]What is tail dependence really? Say the market had a red day and saw a drawdown which belongs with the 5% worst days (from now on simply call it a drawdown): weekly SPY returns One can ask what is now, given that the market is in the blue region, the probability of a a drawdown in a specific stock? We all understand the concept of beta of a stock with respect to the market, the sensitivity of a
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Momentum On Dual Momentum Portfolios [Quants Portal]In the first section, this article describes a Dual Momentum study over an iShares country etfs basket with a new attempt to improve this well-known investing style. I chose iShares because it is the world largest family of Exchange Traded Funds (ETFs) from BlackRock. Although different stock markets correlations have become weaker and weaker in these last 10 years, this article easily shows that
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Hi-Lo Index as a Market Timing Indicator [Alvarez Quant Trading]My strategies use a market timing indicator to tell me when I should not be trading the strategy. The blog post, Avoiding Stock Market Crashes with the Hi-Lo Index of the S&P500, presented a very simple idea of using new highs vs new lows. The post tests trading the SPY & IEF but I wanted to know how well would it work on a S&P500 mean reversion strategy. The Indicator The Hi-Lo Index
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Valuation Metrics In Perspective [Larry Swedroe]Its well-established in the literature that valuation metricssuch as the dividend yield (D/P) and the earnings yield (E/P), as well as its cousin, the Shiller CAPE 10provide important information in terms of future expected returns. In fact, these metrics are the best that investors have for predicting long-term equity results. For instance, the Shiller CAPE 10, a cyclically adjusted
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Pros and Cons of New Technology-enabled Indexes [CXO Advisory]What are pros and cons of extending the definition of financial index beyond conventional market capitalization (buy-and-hold) weighting? In the October 2015 draft of his paper entitled What Is an Index?, Andrew Lo proposes that any portfolio satisfying three properties should be considered an index: (1) transparent (public and verifiable); (2) investable (realistic and liquid benchmark);
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Deconstructing the Time-Series Momentum Strategy [Quantpedia]Moskowitz, Ooi, and Pedersen (2012) show that time series momentum delivers a large and significant alpha for a diversified portfolio of various international futures contracts over the 1985 to 2009 period. Although we confirm these results with similar data, we find that their results are driven by the volatility-scaled returns (or the so-called risk parity approach to asset allocation) rather