Quantocracy’s Daily Wrap for 02/04/2019

This is a summary of links featured on Quantocracy on Monday, 02/04/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • Two Risks That Ruin Long-Run Investing [Two Centuries Investments]

    The first risk of investing is the Drawdown Risk – the loss from the peak. The second risk of investing is the Low Return Risk – the under-performance vs. expectations over a stretched period of time. First, a few words about drawdown. Quants measure risk in many ways like Volatility, Skew, Variance, Beta, Tracking Error etc – but, in my experience, clients care the most about the drawdown. Not
  • What Caused the Volatility Tsunami on 5-Feb-2018? [Six Figure Investing]

    In the afternoon of February 5th, 2018, what looked like a bad day for a group of high flying volatility-based products turned into a devastating decline. Four factors combined to ruin their day: A Flawed Architecture Relying on the Past to Predict the Future Billions Under Management A Record-Breaking VIX spike Twenty-five minutes before the close of the New York Stock exchange on February 5th,
  • Manager Sentiment and Stock Returns [Alpha Architect]

    What are the Research Questions? The authors investigate the asset pricing implications of corporate manager sentiment, focusing on its predictability for future U.S. stock market returns. Specifically, they ask the following research questions: Does high corporate manager sentiment lead to speculative market overvaluation? Is the predictive power of such an indicator stronger compared to other
  • No Pain, No Premium [Flirting with Models]

    In this commentary, we discuss what we mean by the phrase, no pain, no premium. We re-frame the discussion of portfolio construction from one about returns to one about risk and argue that without risk, there should be no expectation of return. With a risk-based framework, we argue that investors inherently act as insurance companies, earning a premium for bearing risk. This risk often
  • Over Two Centuries of Global Factor Premiums [Invest ReSolve]

    Hot off the press, a new paper by Guido Baltussen, Laurens Swinkels and Pim van Vliet at Dutch quant powerhouse, Robeco, covers global multi-asset factor premiums over an unprecedented sample of 217 years. We thought the topics and findings were important and timely enough to warrant a summary. The new paper, titled Global Factor Premiums examines global equity indexes, 10-year government
  • Storing time series data [Cuemacro]

    As regular readers of my posts may have realised, I kind of like burgers. Its a simple meal, but somehow very satisfying. Theres obviously vast differences between the burgers on sale, in terms of quality. It isnt necessarily the case that the most expensive burger will be best. In practice, excessively expensive burgers, end up having too many ingredients, which result in a burger which
  • The Basic Recipe For Rationalizing Errors In Belief [Alex Chinco]

    Behavioral-finance models are often written down so that, although each individual trader holds incorrect beliefs, market events nevertheless unfold in such a way that traders can rationalize their own errors. e.g., consider the model in Scheinkman and Xiong (2003). In this model, each individual trader knows that every other trader is over-confident, and he knows that every other trader thinks

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