This is a summary of links featured on Quantocracy on Monday, 11/25/2024. To see our most recent links, visit the Quant Mashup. Read on readers!
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The Risk-Constrained Kelly Criterion: From definition to trading [Quant Insti]The Kelly Criterion is good enough for long-term trading where the investor is risk-neutral and can handle big drawdowns. However, we cannot accept long-duration and big drawdowns in real trading. To overcome the big drawdowns caused by the Kelly Criterion, Busseti et al. (2016) offered a risk-constrained Kelly Criterion that incorporates maximizing the long-term log-growth rate together with the
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Day 24: Lucky Logic [OSM]On Day 23 we dove into the deep end to understand why the error correction we used worked as well as it did. We showed how traditional machine learning uses loss functions and then hypothesized how our use helped improve predictions through its effect on the correlation of the signs of the prediction with that of the forward return. We have to admit that our decision to use the error term in the
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Factors are global, respectable and repeatable [Alpha Architect]Do we have a chaotic factor zoo as some critics maintain? Is there a replication crisis in the research on factors? The authors of this research answer in the negative and argue that 82% of factors are replicable, the factor zoo is well-organized, and the factors are legit. Such bold statements given the 35% replication rate reported by other, more pessimistic studies. So, whats the key?