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4 days ago

In-Sample vs. Out-Of-Sample Analysis of Trading Strategies

Science has been in a “replication crisis” for more than a decade. But what does it mean to us, investors and traders? Is there any “edge” in purely academic-developed trading strategies and investment approaches after publishing, or will they perish shortly after becoming public? After some time, we will revisit our older blog on this theme and test the out-of-sample decay of trading strategies. But this time, we have hard data — our regularly updated database of replicated quant strategies.

Trading Strategy

1 min read

In-Sample vs. Out-Of-Sample Analysis of Trading Strategies
In-Sample vs. Out-Of-Sample Analysis of Trading Strategies
Trading Strategy

1 min read


May 30

Factor Trends and Cycles

Bearish trends or deep corrections in international equity markets starting in 2022 and rising interest rates worldwide brought investors’ attention back to not only once-proclaimed dead factor investing. From long-run and short run, during different market cycles, different factors behave differently. What’s fortunate is that it is pretty predictable to…

Factor Investing

1 min read

Factor Trends and Cycles
Factor Trends and Cycles
Factor Investing

1 min read


May 26

An Evaluation of the Skewness Model on 22 Commodities Futures

Skewness is one of the less-known but practical measures from statistics that can be used in trading. It is defined as a measure of the asymmetry of the probability distribution of a random variable around its mean. The goal of this analysis is to explore the commodity skewness trading strategy…

Commodities

1 min read

An Evaluation of the Skewness Model on 22 Commodities Futures
An Evaluation of the Skewness Model on 22 Commodities Futures
Commodities

1 min read


May 23

Exploration of the Arbitrage Co-movement Effect in ETFs

We continue our short series of articles dedicated to the exploration of trading strategies that derive their functionality from the deep understanding of how Exchange Trading Funds (ETFs) work. In today’s article, we will analyze how we can use the information about the sensitivity of individual stocks to the ETF arbitrage activity to build a profitable equity factor trading strategy. https://quantpedia.com/exploration-of-the-arbitrage-co-movement-effect-in-etfs/

Arbitrage

1 min read

Exploration of the Arbitrage Co-movement Effect in ETFs
Exploration of the Arbitrage Co-movement Effect in ETFs
Arbitrage

1 min read


May 19

Anomaly Discovery and Arbitrage Trading

Today, we will look closer into the hood of life expectancy of investment strategies and try to answer the critical question on which many, in some sense, if not all, trading strategies are built: what happens with anomalies after their discovery? The paper’s authors, with the sweet, simple name Anomaly Discovery and Arbitrage Trading, analyze a stylized model of anomaly discovery, which has implications for both asset prices and arbitrageurs’ trading. Their original research produced an arbitrageur-based asset pricing model that shows that discovering an anomaly reduces the correlation between the returns of its long- and short-leg portfolios: HFs (professional arbitrageurs) use to increase (unwind) such trades when their wealth increases (decreases), further supporting the view that the discovery effects work through arbitrage trading. This effect is more substantial when arbitrageurs’ wealth is more volatile.

Arbitrage

1 min read

Anomaly Discovery and Arbitrage Trading
Anomaly Discovery and Arbitrage Trading
Arbitrage

1 min read


May 17

How to Rebalance Smart Beta Strategies Smarter

The topic of Smart-Beta is widely recognized, and we cover, monitor, and inform about its developments. The analyzed piece is about the importance of the correct rebalancing strategy and is kindly provided by Research Affiliates. According to a recent research article, investors should re-consider rebalancing with turnover constraint only those stocks that have the strongest signal. Prioritizing trades in stocks that are the farthest removed from the portfolio selection threshold is likely to minimize the expected need for additional trading.

Portfolio Rebalancing

1 min read

How to Rebalance Smart Beta Strategies Smarter
How to Rebalance Smart Beta Strategies Smarter
Portfolio Rebalancing

1 min read


May 12

Comparison of Commodity Momentum Strategy in the U.S. and Chinese Markets

The commodity momentum strategy is a crucial driving force behind Commodity Trading Advisor (CTA) strategies, as it capitalizes on the persistence of price trends in various commodity markets. By identifying and exploiting these trends, CTAs can achieve robust returns and diversification benefits. In their new paper, John Hua FAN and Xiao QIAO (February 2023) present their perspective and understanding of cross–country and cross–sector influences on the behavior of commodity momentum beyond established commodity fundamentals focusing on U.S. and China markets.

Cta

1 min read

Comparison of Commodity Momentum Strategy in the U.S. and Chinese Markets
Comparison of Commodity Momentum Strategy in the U.S. and Chinese Markets
Cta

1 min read


May 8

Quantpedia in April 2023

- an extension of the Strategy Grading Quantpedia Pro report - 10 new Quantpedia strategies - 12 new related research papers - 8 new backtests - 5 new blogs https://quantpedia.com/quantpedia-in-april-2023/

Sharpe Ratio

1 min read

Quantpedia in April 2023
Quantpedia in April 2023
Sharpe Ratio

1 min read


Apr 27

Price Momentum or Factor Momentum: What Leads What?

Continuing our research of different factor allocations and models, we will look at evergreen momentum effect closer. Cakici, Fieberg, Metko, and Zaremba’s (January 2023) paper contributes to the never-ending debate of the chicken-or-egg problem of what comes first: Does the stock price momentum originate from the factor momentum? The study reexamined the relationship between the factor and price momentum on an extensive sample of 95 years of data from 51 countries. And what are the main takeaways? Let’s find out …

Price Action

1 min read

Price Momentum or Factor Momentum: What Leads What?
Price Momentum or Factor Momentum: What Leads What?
Price Action

1 min read


Apr 21

Evaluating Factor Models in China

Today, we will evaluate some specifics that are akin to the now second largest market in the world — China. The abundance of “shell companies” creates a problem when researchers try to uncover sources of alpha in the Chinese market. We present recent research of Zhiyong Li and Xiao Rao (2022) that proposes new alternative filter, which excludes the stocks with a high estimated shell probability when constructing equity factor models.

Factor Investing

1 min read

Evaluating Factor Models in China
Evaluating Factor Models in China
Factor Investing

1 min read

Quantpedia

Quantpedia

744 Followers

Quantpedia.com — The Encyclopedia of Quantitative and Algorithmic Trading Strategies

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