This is a summary of links featured on Quantocracy on Wednesday, 11/16/2016. To see our most recent links, visit the Quant Mashup. Read on readers!
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Mean Reversion Trading System [Milton FMR]Many traders who managed to design and implement a mean reversion system correctly made a fortune. Fact is that financial markets move in patterns and especially in cycles. In simple words everything that goes up must come down and everything that goes down must come up. Nothing moves in one direction forever. When it comes to the markets we basically have two possible outcomes its either
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Levy flights. Foraging in a finance blog [Quant Dare]Does this graph look like a kids drawing? Maybe a piece of art from the monkey Jeff? No, of course Jeff draws better than this. Actually, it is a representation of what is known as a Lvy flight, a mathematical concept that shows up in nature, marketing, cryptography, astronomy, biology, physics and nowadays even in social media. Here are a couple of examples of Lvy flights for
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Quant investing: making momentum tolerable [Investing For A Living]For today s post and the next few Ill be going back to my favorite topic, quant investing. In this post I want to explore pure momentum quant portfolios and in particular ways to make pure momentum investing tolerable and implementable to more investors. Note: for a refresher on momentum and its power (arguably the most powerful factor in investing) see this great paper from AQR. You may
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Is synthetic XIV/VXX data safe to use? [Alvarez Quant Trading]I have done several posts about trading XIV & VXX. In these posts (here, here and here) I refer to using synthetic data before these ETFs started trading. I supported the use of the data due to the very high correlation of daily returns during the overlap period. With a correlation of .97, I thought great the data should be good to use for backtesting. Then the head slapping moment. Run the
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An Evidence-Based Low Volatility Investing Discussion [Alpha Architect]Jack and I had the honor of attending the Evidence-Based Investing conference, hosted by the team at Ritholz Wealth Management. Wow. What a great event and a great group of inspiring investors and thinkers. Abe, Meb, John, Mike, and I had the opportunity to chat about systematic investing. Mr. Lincoln was a little lost during the conversation, but thats okay hes old.
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What is the Capacity of Smart Beta Strategies? [Quantpedia]Using a transaction cost model, and an assumption for the smart beta premium observed in data, we estimate the capacity of momentum, quality, value, size, minimum volatility, and a multi-factor combination of the first four strategies. Flows into these factor strategies incur transaction costs. For a given trading horizon, we can find the fund size where the associated transaction costs negate the