This is a summary of links featured on Quantocracy on Tuesday, 11/17/2015. To see our most recent links, visit the Quant Mashup. Read on readers!
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The Mean Reversion Case For (and Against) Strong Future Returns [EconomPic]Bull thesis: 15-year S&P annualized returns ending 9/30/15 came in at just under 4%. The average forward return since 1915 when returns were that level (or lower) was 15.5% annualized over the next 15 years with a standard deviation of only 2% Bear thesis: the 15-year starting point came when the previous 15 year annualized returns were just under 18% (i.e. we are still working off extreme
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Acceleration and Momentum [Factor Wave]The momentum factor has been extensively studied. We know it predicts outperformance both in the absolute and in the cross section. Momentum has been studied in many markets and over extensive time periods. But a recent interesting paper instead looks at whether the change of momentum is a useful predictive factor. In The Acceleration Effect and Gamma Factor in Asset Pricing, Diego
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David Dreman on Value Investing and Investor Overreaction [Alpha Architect]David Dreman is a personal hero of mine. Years ago, I stumbled on his book, Psychology and the Stock Market: Investment Strategy Beyond Random Walk, which was originally published in 1977. It had a huge impact on me. Its timeless, with lessons that still apply to value investing today. It was among the first books I read that explained clearly how investor psychology affected the stock
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The average stock market year [UK Stock Market Almanac]What does an average year for the FTSE 100 Index look like? The summary pages for each month in the diary section of the Almanac have charts that show the average cumulative behaviour of the market day-by-day. These charts are produced by calculating the daily mean return for each day in the trading year over a specific period (in this case from 1984). For example, if we take the index returns on