This is a summary of links featured on Quantocracy on Monday, 11/19/2018. To see our most recent links, visit the Quant Mashup. Read on readers!
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Directionally Right and Precisely Wrong [Flirting with Models]Portfolio construction decisions tell us about more than just our objective: they tell us about our beliefs. In practice, our beliefs extend beyond views of returns, volatilities, and correlations; we also hold views about our ability to measure these concepts and our confidence in those measures. We explore the use of data transformations functions applied to data that manipulate how
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Short volatility strategies are extensive and widespread [Alpha Architect]Who are the buyers and sellers of volatility-contingent strategies? How extensive is volatility trading and put selling currently? Could a volatility cascade cause a crash across correlated asset classes? Are there mechanisms that might provide stabilization? What are the Academic Insights? QUITE EXTENSIVE. Institutional investors such as sovereign wealth funds, larger public pension funds,
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The Rise of Zombie Stocks [Factor Research]This research note was originally published by the CAIA Associations AllAboutAlpha blog. Here is the link. SUMMARY Zombie firms, where interest payments exceed operating profits, are on the rise Zombie stocks perform surprisingly well They are expensive, volatile stocks from diverse sectors INTRODUCTION The Bank for International Settlements (BIS) recently published research on the rise of
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Thanksgiving Week Seasonality An Updated Look [Quantifiable Edges]The time around Thanksgiving has shown some strong tendencies over the years both bullish and bearish. I have discussed them a number of times over the years. In the updated table below I show SPX performance results based on the day of the week around Thanksgiving. The bottom row is the Monday of Thanksgiving week. The top row is the Monday after Thanksgiving. 2018-11-19 Monday and Tuesday of
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Realistic volatility risk premia [SR SV]The volatility risk premium compensates investors for taking volatility risk. Conceptually it is based on the difference between options-implied and expected realized volatility. In equity markets this premium should be positive in the long run and fluctuate overtime depending on the markets willingness to pay for protection against future changes in price volatility. In practice, measuring the
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Weekly Recap: Factors, Opportunity Zones, and HFs [Alpha Architect]This week Ryan and I discuss three topics. First, we examine the returns to U.S. stock broken down by (1) size and (2) factors (mega-cap stocks were the place to invest over the last 5 years!). Second, we examine a post by Adam Tkaczuk on Opportunity Zonesa must read for those with low basis securities. Third, we examine a post by Tommi on Hedge Funds and their role in reducing mispricing.