New related paper to #3 - Sector Momentum - Rotational System Monday, 11 May, 2015

#3 - Sector Momentum - Rotational System

Authors: Du Plessis, Hallerbach

Title: Volatility Weighting Applied to Momentum Strategies

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2599635

Abstract:

We consider two forms of volatility weighting (own volatility and underlying volatility) applied to cross-sectional and time-series momentum strategies. We present some simple theoretical results for the Sharpe ratios of weighted strategies and show empirical results for momentum strategies applied to US industry portfolios. We find that both the timing effect and the stabilizing effect of volatility weighting are relevant. We also introduce a dispersion weighting scheme which treats cross-sectional dispersion as (partially) forecastable volatility. Although dispersion weighting improves the Sharpe ratio, it seems to be less effective than volatility weighting.

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New related paper to #12 - Pairs Trading with Stocks Tuesday, 5 May, 2015

#12 - Pairs Trading with Stocks

Authors: Almeida

Title: Improving Pairs Trading

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2432061

Abstract:

This paper tests the Pairs Trading strategy as proposed by Gatev, Goetzmann and Rouwenhorts (2006). It investigates if the profitability of pairs opening after an above average volume day in one of the assets are distinct in returns characteristics and if the introduction of a limit on the days the pair is open can improve the strategy returns. Results suggest that indeed pairs opening after a single sided shock are less profitable and that a limitation on the numbers of days a pair is open can significantly improve the profitability by as much as 30 basis points per month.

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New related paper to #20 - Volatility Risk Premium Effect Thursday, 30 April, 2015

#20 - Volatility Risk Premium Effect

Authors: Israelov, Nielsen

Title: Still Not Cheap: Portfolio Protection in Calm Markets

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2579232

Abstract:

Recent equity volatility is near all-time lows. Option prices are also low. Many analysts suggest this represents a good opportunity to purchase put options for portfolio insurance. It is well-known that portfolio insurance is expensive on average, but what about in calm markets? History suggests it still is. We investigate the relationship between option richness and volatility across ten global equity indices. Option prices may be low, but their expected values tend to be even lower.

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New related paper to #21 - Momentum Effect in Commodities and #22 - Term Structure Effect in Commodities Monday, 27 April, 2015

#21 - Momentum Effect in Commodities
#22 - Term Structure Effect in Commodities

Authors: Bakshi, Bakshi, Rossi

Title: Understanding the Sources of Risk Underlying the Cross-Section of Commodity Returns

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2589057

Abstract:

We show that a model featuring an average commodity factor, a carry factor, and a momentum factor is capable of describing the cross-sectional variation of commodity returns. More parsimonious one- and two-factor models that feature only the average and/or carry factors are rejected. To provide an economic interpretation, we show that innovations in equity volatility can price portfolios formed on carry with a negative risk premium, while innovations in our measure of speculative activity can price portfolios formed on momentum with a positive risk premium. Furthermore, we characterize the relation of the factors with the investment opportunity set.

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Quantpedia's Master lists - Historical Data and Backtesting Software Monday, 20 April, 2015

Dear visitors,

We have launched a new subpage on Quantpedia.com which will contain master lists of tools for quantitative traders. We have started with a comprehensive lists of backtesting software and historical data sources:

http://quantpedia.com/Links/Backtesters
http://quantpedia.com/Links/HistoricalData

We have a good responses on them so far therefore I hope you will find them helpful too. Let us know if you are missing some source in our list, we will add it there.

The QUANTPEDIA Team