Quant Mashup

Sort by:

Tactical Asset Allocation in July [Allocate Smartly]

This is a summary of the recent performance of a wide range of excellent tactical asset allocation strategies. These strategies are sourced from books, academic papers, and other publications. While we don’t (yet) include every published TAA model, these strategies are broadly representative of

- 15 hours ago, 1 Aug 2017, 12:30pm -

Leveraged ETF – A Simulation [Alphaism]

This post is a token of appreciation for Faisal Habib who taught us structured products this summer. As commonly known among people who are familiar with leveraged ETFs, the tracking error of those products tend to be larger than what we intuitively expected. This phenomenon has been explored and

- 15 hours ago, 1 Aug 2017, 12:30pm -

Academic Research Insight: Digging into ETF Trading Spreads [Alpha Architect]

The article provides new empirical evidence on the state of market efficiencies in ETFs by studying the following questions: What is the magnitude of the ETF premiums across all US-listed ETFs and all underlying asset class and over time? In particular, what is the magnitude of “true” ETF

- 1 day ago, 31 Jul 2017, 01:54pm -

Micro Caps, Factor Spreads, Structural Biases, and the Institutional Imperative [Factor Investor]

So far in this series, we’ve covered faulty benchmark construction, the wide array of fundamental drivers, and the critical importance of quality in cutting through the noise among micro cap stocks. Now, we turn to the largest factor spreads I’ve come across in any segment of the market, real

- 3 days ago, 29 Jul 2017, 11:08am -

We Love Free Data: Replacing Yahoo Finance Market Data [Robot Wealth]

In keeping with our recent theme of providing useful tidbits of algo trading practicalities, here’s an elegant solution that resolves Yahoo’s unceremonious exit from the free financial data space. Regular readers would know that I use various tools in my algo trading stack, but the one I keep

- 4 days ago, 29 Jul 2017, 12:25am -

Vigilant Asset Allocation from Dr. Wouter Keller and JW Keuning [Allocate Smartly]

This is a test of the “Vigilant Asset Allocation” (VAA) strategy from the recently published paper: Breadth Momentum and Vigilant Asset Allocation, by Dr. Wouter Keller and JW Keuning. This is an aggressive momentum trading model, similar in spirit to Keller and Keuning’s popular Protective

- 5 days ago, 27 Jul 2017, 07:26am -

Trend and Carry Everywhere [Cantab Capital]

Simple rules on macro assets can create very attractive returns. We present a simple trend system and a simple carry system and show how the combination of the two return streams appears very attractive. Summary Trend following in one form or another has been an investment style for decades.

- 5 days ago, 27 Jul 2017, 07:25am -

Derivatives Pricing II: Volatility Is Rough [Quant Start]

In this new article series QuantStart returns to the discussion of pricing derivative securities, a topic which was covered a few years ago on the site through an introduction to stochastic calculus. Imanol Pérez, a PhD researcher in Mathematics at Oxford University, and an expert guest contributor

- 5 days ago, 27 Jul 2017, 07:25am -

Financialization of Crude Oil Market [Quantpedia]

The financialization of crude oil markets over the last decade has changed the behavior of oil prices in fundamental ways. In this paper, we uncover the gradual transformation of crude oil from a physical to a financial asset. Although economic demand and supply factors continue to play an important

- 5 days ago, 27 Jul 2017, 07:25am -

Testing Equity Factor Allocation Strategies With Random Portfolios [Capital Spectator]

Designing and managing asset allocation strategies based on factors is promoted in some corners as a better way to build portfolios. Not surprisingly, there’s no shortage of studies that support this view. But the jury’s still out on whether it’s prudent to throw out the standard asset-class

- 6 days ago, 26 Jul 2017, 11:12am -

Stochastic portfolio theory, revisited! [Quant Dare]

I’m here today to talk about the Stochastic Portfolio Theory (SPT). SPT is a relatively new portfolio management theory. It was first introduced in 1999 by Robert Fernholz. In my opinion, SPT is very attractive for several reasons: it’s theoretical, it’s not very well known and, most

- 6 days ago, 26 Jul 2017, 11:12am -

Why Today’s Fed Day Setup May Not Be As Bullish As Most [Quantifiable Edges]

Wednesday is a Fed Day. Fed Days have historically shown an upside tendency. I have documented this tendency in great detail over the years, with the most complete documentation coming in The Quantifiable Edges Guide to Fed Days. Based on what the market did Tuesday, this does not seem to be the

- 6 days ago, 26 Jul 2017, 11:12am -

Trick Question: How is the Momentum Factor Performing YTD? [Alpha Architect]

If you ask your typical long-only investor (or financial advisor) how momentum is doing this year they’ll likely say, “Amazing!” This statement will almost surely be based on the fact they own (or know about) the iShares “Momentum Factor” Fund (Ticker: MTUM). MTUM is on fire year to date

- 1 week ago, 24 Jul 2017, 11:50pm -

The Case for the Harmonic Mean P/E Calculation [EconomPic]

The most recent "analysis" seemingly spreading like wildfire across the perma-bear community was performed by Horizon Kinetics in their most recent quarterly commentary. Their claim is that the price-to-earnings of the Nasdaq (or any index really) is much higher than reported because we

- 1 week ago, 24 Jul 2017, 11:50pm -

Academic Research Insight: When Does International Investing Make Sense? [Alpha Architect]

What are the research questions? Market globalization is said to be the culprit of decreased benefits of international diversification. In 1995, a US investor investing in Vodafone had exposure to 99% of UK based sales. The same investor in 2012 is exposed to UK sales only for 8% while at the same

- 1 week ago, 24 Jul 2017, 11:49pm -

Information Content in the Limit Order Book for Crude Oil Futures (WTI) [Golden Compass]

Order book imbalance strategies have been a big alpha source in automated market making. Tick by tick observations provide important information about general market sentiment and direction, and high frequency trading firms (HFTs) have been very efficient at trading on this information at very low

- 1 week ago, 24 Jul 2017, 10:37am -

Separating Positions from Allocations [Following the Trend]

Most trading models I see are missing an important concept. It’s not a terribly difficult concept, but it is an important one. It’s not at all strange that most traders, in particular on the retail side, are missing this point. Most trading books skip over it. Most books gloss over it, or just

- 1 week ago, 24 Jul 2017, 10:36am -

Managing Capital Market Assumption Risk [Flirting with Models]

Calculating an optimal portfolio from a set of capital market assumptions (CMAs) is a straightforward quantitative exercise, but the results are highly dependent on the assumptions holding in the future. Any portfolio that is initially assumed to be optimal will be sub-optimal if any single assumed

- 1 week ago, 24 Jul 2017, 10:35am -

Trend-Following with Valeriy Zakamulin: Types of Moving Averages (Part 2) [Alpha Architect]

In my previous blog post we considered the general weighted moving average. In this post we aim to give an overview of some specific types of moving averages. Specifically, we cover “ordinary” moving averages and mention some examples of exotic moving averages. Ordinary Moving Averages These are

- 1 week ago, 21 Jul 2017, 12:41pm -

Building an Insider Trading Database and Predicting Future Equity Returns [EP Chan]

I’ve long been interested in the behavior of corporate insiders and how their actions may impact their company’s stock. I had done some research on this in the past, albeit in a very low-tech way using mostly Excel. It’s a highly compelling subject, intuitively aligned with a company’s

- 1 week ago, 21 Jul 2017, 10:31am -

How to Run Trading Algorithms on Google Cloud Platform in 6 Easy Steps [Robot Wealth]

Earlier this year, I attended the Google Next conference in San Francisco and gained some first hand perspective into what’s possible with Google’s cloud infrastructure. Since then, I’ve been leaning on Google Cloud Platform (GCP) to run my trading algorithms (and more) and it has become an

- 1 week ago, 19 Jul 2017, 10:51pm -

How to Improve Shiller's CAPE Ratio [Quantpedia]

The accuracy of U.S. stock return forecasts based on the cyclically-adjusted P/E (CAPE) ratio has deteriorated since 1985. The issue is not the CAPE ratio, but CAPE regressions that assume it reverts mechanically to its long-run average. Our approach conditions mean reversion in the CAPE ratio on

- 1 week ago, 19 Jul 2017, 10:51pm -

EconomVIX...A Summary of Past VIX Posts [EconomPic]

RCM Alternatives has a great piece (HT Tadas) out outlining what the VIX is, the market for VIX related products, and how to think about volatility as an asset class. It also happens to contain my new favorite quote for anyone thinking about trading volatility: Still, if you cannot see the VIX

- 2 weeks ago, 18 Jul 2017, 11:38pm -

Backtesting Systematic Trading Strategies in Python: Considerations and Open Source Frameworks [Quant Start]

In this article Frank Smietana, one of QuantStart's expert guest contributors describes the Python open-source backtesting software landscape, and provides advice on which backtesting framework is suitable for your own project needs. Backtesting is arguably the most critical part of the

- 2 weeks ago, 18 Jul 2017, 10:46am -

Academic Research Insights: Does the Scope of the Sell-Side Analyst Industry Matter? [Alpha Architect]

What are the research questions? Do variations in aggregate measure of size and activity of sell-side analysts affect the quality of research produced by that industry? Do those same variations in aggregate measures of size and activity of sell-side analysts affect optimism bias in the research

- 2 weeks ago, 18 Jul 2017, 10:46am -

Combining Tactical Views with Black-Litterman and Entropy Pooling [Flirting with Models]

In last week’s commentary, we outline a number of problems faced by tactical asset allocators in actually implementing their views. This week, we explore popular methods for translating a combination of strategic views and tactical views into a single, comprehensive set of views that can be used

- 2 weeks ago, 17 Jul 2017, 09:31am -

The birth of a strategy pt. 2 – extending VXX history and other data concerns [Quant Bear]

This is the third part in a series describing how to approach the creation of a new trading strategy, including everything from idea generation, universe selection, data generation, proper in/out of sample testing, necessary considerations before live trading and the eventual big decision: do I want

- 2 weeks ago, 16 Jul 2017, 11:41pm -

Breadth Momentum and Vigilant Asset Allocation (VAA) [TrendXplorer]

Breadth momentum extends traditional absolute momentum approaches for crash protection. Breadth momentum quantifies risk at the universe level by the number of assets with non-positive momentum relative to a breadth protection threshold. Vigilant Asset Allocation matches breadth momentum with a

- 2 weeks ago, 15 Jul 2017, 12:19am -

Is Equity Premium Predictable? [Quantpedia]

We study the performance of a comprehensive set of equity premium forecasting strategies that have been shown to outperform the historical mean out-of-sample when tested in isolation. Using a multiple testing framework, we find that previous evidence on out-of-sample predictability is primarily due

- 2 weeks ago, 15 Jul 2017, 12:18am -

Identifying Asset Pairs For Pairs Trading [Koppian Adventures]

Last time, we talked about how to identify stationary time series. Today we continue this line of thought by defining cointegration and looking at its usage in trading. In particular, we will discuss how a pairs trading strategy works. Motivation If we remember that stationarity assumes that a mean

- 2 weeks ago, 15 Jul 2017, 12:18am -

Trend-Following with Valeriy Zakamulin: Moving Average Basics (Part 1) [Alpha Architect]

One of the basic principles of technical analysis is that “prices move in trends.” Traders firmly believe that these trends can be identified in a timely manner and used to generate profits and limit losses. Consequently, trend following is arguably one of the most widespread market timing

- 2 weeks ago, 14 Jul 2017, 12:28pm -

Trend Following Research [Dual Momentum]

There have been hundreds of research papers on relative strength momentum since the seminal work by Jegadeesh and Titman in 1993. [1] Relative momentum has been shown to work in and out-of-sample within and across most asset classes. Theoretical results have been consistent, persistent, and robust.

- 2 weeks ago, 14 Jul 2017, 09:25am -

The profitability factor [Investing For A Living]

What would you think of a quant strategy that only invests in the most profitable companies? Would it under perform the market or beat the market? If you’re an efficient market person you may think that higher profitability must be priced into equities and therefore at best the strategy would

- 2 weeks ago, 14 Jul 2017, 09:25am -

Out-of-sample testing and luck [Alvarez Quant Trading]

Continuing from the last post, I will show how using different definitions of passing our out-of-sample test can change our results. How luck can play a role if you use only one strategy to test in out-of-sample. How you split your in-sample(IS) and out-of-sample(OOS) can change results. The

- 2 weeks ago, 12 Jul 2017, 12:54pm -

Avoiding Overpriced Winners: A Better Way to Capture the Momentum Premium? [Alpha Architect]

Any frequent reader of our blog knows we are fans of momentum investing. At this point, investment professionals should know that momentum historically works, that momentum is painful, and we have our own opinions on how to implement momentum investing via our Quantitative Momentum Index. Sometimes

- 2 weeks ago, 12 Jul 2017, 12:54pm -

"Past performance is no guarantee of future results", but helps a bit [Quant Dare]

We are rather used to reading this disclaimer (or some variation thereof) in mutual fund prospectuses or investment vehicle webpages. Despite warnings, investors and advisors insist on considering past performance (and some other related metrics) as important factors in asset selection. But, are

- 2 weeks ago, 12 Jul 2017, 12:53pm -

Four Important Details in Tactical Asset Allocation [Flirting with Models]

Newfound specializes in systematic, factor-based approaches to constructing tactical portfolios. While we believe factors like value, momentum, carry, and trend are applicable at the asset class level, care must be taken in designing tactical allocation portfolios. We outline four considerations

- 3 weeks ago, 10 Jul 2017, 01:10pm -

Academic Research Insight: Facts about Factors [Alpha Architect]

What are the research questions? Do factors offer superior diversification benefits relative to assets because factors are less correlated with each other? Does consolidating a larger set of assets into a smaller set of factors reduce noise? Are investors more skilled at relating current information

- 3 weeks ago, 10 Jul 2017, 01:10pm -

Intratrade [Golden Compass]

This article is on the analysis of intra-arrival times of future contract trades, analysing market behaviour, and identification of other particpants’ trading strategy. Intra-arrival time has close relationship with the quantity of each trade. One reason behind this is that many participants use

- 3 weeks ago, 10 Jul 2017, 01:12am -

Hacking a HFT system [Financial Hacker]

Compared with machine learning or signal processing algorithms of conventional trading strategies, High Frequency Trading systems can be surprisingly simple. They need not attempt to predict future prices. They know the future prices already. Or rather, they know the prices that lie in the future

- 3 weeks ago, 9 Jul 2017, 10:50pm -

How to Build a Sequential Option Scraper with Python and Requests [Black Arbs]

In the previous post I revealed a web scraping trick that allows us to defeat AJAX/JavaScript based web pages and extract the tables we need. We also covered how to use that trick to scrape a large volume of options prices quickly and asynchronously using the combination of aiohttp and asyncio. The

- 3 weeks ago, 9 Jul 2017, 10:50pm -

Do Security Analyst Recommendations Bet on or Against Academic Findings? [Alpha Architect]

As my co-author Andrew Berkin, the director of research for Bridgeway Capital Management, and I explain in our new book, “Your Complete Guide to Factor-Based Investing,” there is considerable evidence of cross-sectional return predictability. Citing more than 100 academic papers, we present the

- 3 weeks ago, 7 Jul 2017, 12:32pm -

Growth Optimal Portfolios [Flirting with Models]

Traditional portfolio management focuses explicitly on the trade-off between risk and return. Anecdotally, investors often care more about the growth of their wealth. Due to compounding effects, wealth is a convex function of realized returns. Within, we explore geometric mean maximization, an

- 3 weeks ago, 5 Jul 2017, 11:47pm -

Lasso, Lasso, Lasso (and friends) [Eran Raviv]

LASSO stands for Least Absolute Shrinkage and Selection Operator. It was first introduced 21 years ago by Robert Tibshirani (Regression shrinkage and selection via the lasso. Journal of the Royal Statistical Society. Series B). In 2004 the four statistical masters: Efron, Hastie, Johnstone and

- 3 weeks ago, 5 Jul 2017, 11:47pm -

First half of 2017 down for Trend Following [Wisdom Trading]

June 2017 Trend Following: DOWN -3.44% / YTD: -16.88% The whole first half of 2017 was negative, with the June result following the same trend. The YTD figure is now well in the red and it would take a good reversal of that equity curve to erase the losses through the second half of the year. Below

- 3 weeks ago, 5 Jul 2017, 11:46pm -

Hacking Compound Annual Growth Rate [Rayner Gobran]

This the third in my Hedge Fund Hacks series in which I dig just below the surface of some of the common hedge fund performance statistics. In the previous post I highlighted some of the ways in which Compound Annual Growth Rate can be distorted by chance. In this post I provide a simple hack to

- 3 weeks ago, 5 Jul 2017, 12:46pm -

Capital Asset Pricing Model (CAPM) [No Noise Only Alpha]

While I am a believer of APT more than of CAPM, I will share some of my findings on CAPM. CAPM has many flaws: there are capital taxes, high transaction cost on illiquid securities with few floating shares, licensed leveraged funds do influence prices with outsized positions, different analyst has a

- 3 weeks ago, 5 Jul 2017, 12:45pm -

Tactical Asset Allocation in June [Allocate Smartly]

- 4 weeks ago, 3 Jul 2017, 01:23pm -

Mistakes when backtesting trading strategies [Cuemacro]

You know how it feels. Time has come and gone, and still no progress. Then hours later, you’ve found the mistake, and you’re absolutely kicking yourself. Coding is very much a case of trial and error. You just need enough stubbornness not to give up to get your code to run properly. Most of the

- 1 month ago, 1 Jul 2017, 01:51pm -

Using a Market Timing Rule to Size an Option Position, A Static Case [Relative Value Arbitrage]

In the previous installment, we discussed the use of a popular asset allocation/market timing rule (10M SMA rule hereafter) to size a short option position. The strategy did not work well as it was the case in traditional asset allocation. We thought that the poor performance was due to the fact

- 1 month ago, 30 Jun 2017, 10:46pm -