This is a summary of links recently featured on Quantocracy as of Friday, 12/06/2024. To see our most recent links, visit the Quant Mashup. Read on readers!
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Taking an income from your trading account – probabilistic Kelly with regular withdrawals [Investment Idiocy]Programming note: This post has been in draft since … 2016! One question you will see me asked a lot is 'how much money do I need to become a full time trader?'. And I usually have a handwaving answer along the lines of 'Well if you think your strategy will earn you 10% a year, then you probably want to be able to cover 5 years of expenses with no income from your trading
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Day 29: Out of sample [OSM]The moment of truth has arrived! On Day 28, we iterated through all the metrics we had previously used to identify and analyze the robustness of our strategy. We found the new adjusted strategy performed better than the original and adjusted strategies. Such performance was also statistically significant for key scenarios. But on simulation, buy-and-hold beat the new adjusted strategy on average
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Laying the Groundwork for Ito’s Lemma and Financial Stochastic Models [Quant Insti]This is a two-part blog where well explore how Itos Lemma extends traditional calculus to model the randomness in financial markets. Using real-world examples and Python code, well break down concepts like drift, volatility, and geometric Brownian motion, showing how they help us understand and model financial data, and well also have a sneak peek into how to use the same for trading
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Diversifying Trend Following Strategies Improves Portfolio Efficiency [Alpha Architect]Since the turn of the century portfolios have been exposed to four periods of crisis: the bursting of the tech bubble and the events of September 11, 2001, from 2000-2002; the Great Financial Crisis in 2007-2008, the COVID-19 pandemic in 2020, and the period of persistent inflation in 2022 when both stocks and bonds experienced double-digit losses. These experiences increased investor interest in
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Research Review | 6 December 2024 | Index and Passive Investing [Capital Spectator]Limits to Diversification: Passive Investing and Market Risk Lily H. Fang (INSEAD), et al. September 2024 We show that the rise of passive investing leads to higher correlations among stocks and increased market volatility, thereby limiting the benefit of diversification. The extent to which a stock is held by passive funds (index mutual funds and ETFs) positively predicts its beta, correlation,