This is a summary of links featured on Quantocracy on Monday, 12/28/2015. To see our most recent links, visit the Quant Mashup. Read on readers!
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State Space Models and the Kalman Filter [Quant Start]To date in our time series analysis posts we have considered linear time series models including ARMA, ARIMA as well as the GARCH model for conditional heteroskedasticity. In this article we are going to consider the theoretical basis of state space models, the primary benefit of which is that their parameters can adapt over time. State space models are very general and it is possible to put the
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Why Index Investing Wins [Larry Swedroe]J.B. Heaton, Nick Polson and J.H. Witte recently authored a nice short paperits all of four pagesentitled Why Indexing Works. In it, the authors developed a simple stock selection model to explain why active equity fund managers tend to underperform their benchmark index. While most of the academic literature focuses on the efficiency of the market and the higher costs of active
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Our Favorite Commentaries from 2015 [Flirting with Models]This commentary is available for download here. There is an adage on Wall Street that comes around every January. And every January, we debunk it. In As Goes January, So Goes the Year, we remind readers that while the performance of markets in January will, by definition, influence the total return of the year, the returns in January say nothing about market returns in February through December.
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Machine Learning and Mechanical Trading with Genotick [Throwing Good Money]Ive recently been experimenting with Genotick, which is open-source java software that attempts to discover mechanical trading systems through the use of machine learning. You can run it on just about any Mac/Windows/Linux system (although you may have additional hurdles to get java8 working at the command-line level on a Mac). Thousands of tiny programs create random rules to predict the next