This is a summary of links recently featured on Quantocracy as of Wednesday, 02/26/2025. To see our most recent links, visit the Quant Mashup. Read on readers!
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Trading the Fed: The Pre-FOMC Drift is Alive [Quant Seeker]The pre-FOMC announcement drift is a well-documented anomaly where equities exhibit abnormal positive returns leading up to Federal Open Market Committee (FOMC) meetings, challenging traditional asset pricing models. In this blog post, I test the anomaly using data through December 2024 and find that it remains persistent despite being published over a decade ago. The results confirm that the
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Sequential Entropy Pooling [Anton Vorobets]Entropy Pooling is a core method of the next generation investment framework, thoroughly presented in the Portfolio Construction and Risk Management book1. As a very oversimplified introduction to Entropy Pooling, you can think about it as a generalization of the Black-Litterman model without all the oversimplifying normal distribution and CAPM assumptions. Entropy Pooling works for fully general
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How to evaluate leading indicators [Unravel Markets]I started this Substack, as I found close to zero investment research material that Id consider rigorous-enough predictive analytics also the reason why I co-founded Unravel. What I rather see a lot is: the price of the asset, and another metric plotted on the same chart, with someone proclaiming that This has been a leading indicator watch what will happen now!. So, this
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Weekly Recap [Quant Seeker]Commodities Commodity dependence and optimal asset allocation (Dequiedt, Gomes, Pukthuanthong, and Williams) Investors often assume adding commodities to a portfolio enhances diversification. However, this paper finds that the benefits depend on a countrys economic structure. In nations heavily reliant on commodity exports, local stocks and bonds move in sync with commodity prices, limiting
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Volatility Risk Premium: The Growing Importance of Overnight and Intraday Dynamics [Relative Value Arbitrage]The breakdown of the volatility risk premium into overnight and intraday sessions is an active and emerging area of research. It holds not only academic interest but also practical implications. ETF issuers are launching new ETFs to capitalize on the overnight risk premium, and the shift toward around-the-clock trading could impact the VRP and popular strategies such as covered call writing. In
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Using Inflation Data for Systematic Gold and Treasury Investment Strategies [Quantpedia]Inflation significantly impacts the prices of gold and treasury bonds through various mechanisms. Gold is often viewed as a hedge against inflation, while treasury bonds exhibit a more complex relationship influenced by interest rates and investor behavior. This relationship between inflation, gold, and treasuries is well understood, but the real question is whether we can systematically