This is a summary of links recently featured on Quantocracy as of Tuesday, 03/04/2025. To see our most recent links, visit the Quant Mashup. Read on readers!
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Very… slow… mean reversion, and some thoughts on trading at different speeds [Investment Idiocy]Bit of a mixed bag post today. The golden thread connecting them is the idea that markets trend and mean revert at different frequencies. – A review of the discussion around timeframes for momentum and mean reversion in 'Advanced Futures Trading Strategies', in light of this excellent recent paper (which I also discussed on the TTU podcast, here from 1:02:12 onwards). – A mea culpa on
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Weekly Recap [Quant Seeker]Commodities Macroeconomic Conditions, Speculation, and Commodity Futures Returns (Adhikari and Putnam) This paper tests the predictability of weekly commodity returns using a range of macroeconomic variables and measures of speculation derived from the Commitment of Traders report. The predictive power of speculation varies across time and commodity sectors, while the St. Louis Fed Financial
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What is Trend Following? A Painful Journey to Smarter Investing [Alpha Architect]When it comes to choosing an investment strategy, most investorswhether they realize it or notare looking for something that: Beats the benchmark Never loses money Works all the time And heres the harsh reality: this unicorn of a strategy doesnt exist. Anyone promising you all three is either blissfully ignorant or straight-up lying. Trend following is no exception. Trend following is
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Batch Linear Regression via Bayesian Estimation [Quant Start]In previous articles we have discussed the theory of state space models and Kalman Filters as well as their application to estimating a dynamic hedging ratio between a pair of cointegrating ETFs. The articles were relatively light on theory and did not explore the much broader field of Bayesian Filtering and Smoothing, which the Kalman Filter is a part of. In this new series of articles we are
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Understanding Mean Reversion to Enhance Portfolio Performance [Relative Value Arbitrage]In a previous newsletter, I discussed momentum strategies. In this edition, Ill explore mean-reverting strategies. Mean reversion is a natural force observed in various areas of life, including sports performance, portfolio performance, volatility, asset prices, etc. In this issue, I specifically examine the mean reversion characteristics of individual stocks and indices. Long-Run Variances of
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Understanding the Stock Bond Correlation [Alpha Architect]This study looks at how stocks and bonds move together over time, using data from 1875 to 2023. The authors find that inflation, interest rates, and government stability affect this relationship. When inflation and interest rates go up, stocks and bonds tend to move in the same direction, making diversification less effective. This means investors may need other assets, like commodities or