This is a summary of links recently featured on Quantocracy as of Tuesday, 07/15/2025. To see our most recent links, visit the Quant Mashup. Read on readers!
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The Unintended Consequences of Rebalancing [Quantitativo]I picked up one or two pieces and examined them attentively… I then collected four or five pieces and went to Mr. Scott… I said, I believe this is gold. James W. Marshall. He found gold and died broke. James W. Marshall unintentionally sparked one of the greatest migrations in American history. In 1848, while building a sawmill on the American River, he noticed a few glimmers in
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Weekly Research Recap [Quant Seeker]In-Sample and Out-of-Sample Sharpe Ratios for Linear Predictive Models (Jacquier, Muhle-Karbe, and Mulligan) Combining many weak signals can raise a models in-sample Sharpe ratio, but this paper shows it often backfires out of sample due to overfitting. Even if the combined model looks better in backtests, it tends to perform worse in live trading than simpler models built on fewer, stronger
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How Fragile is Liquidity Across Asset Classes? [Quantpedia]The paper Through Stormy Seas: How Fragile is Liquidity Across Asset Classes? is a very interesting examination of how liquidity properties have evolved over the past decade. Although the average bidask spread has declined, the kurtosis and skewness of the spread distribution have increased. What does this imply? On average, markets appear more liquid; however, liquidity evaporates more
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The Rise of 0DTE Options: Cause for Concern or Business as Usual? [Relative Value Arbitrage]Zero DTE (Days to Expiration) options are contracts that expire on the same day they are traded. They were introduced in 2022 and have been gaining popularity. In this post, I discuss their impact on the market and how options traders use them. Impact of Zero DTE Options on the Market Zero DTE (0DTE) options, also known as same-day expiration options, are financial derivatives with