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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

New related paper to #5 - FX Carry Trade Friday, 17 April, 2015

#5 - FX Carry Trade

Authors: Maurer, To, Tran

Title: Pricing Risks Across Currency Denominations

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2589545

Abstract:

Investors based in different countries earn different returns on same strategies because the same risks covary differently with countries' stochastic discount factors (SDFs). We document that investors in low-interest-rate countries earn more than those in high-interest-rate countries on identical carry trade strategies. We propose a novel econometric procedure to estimate country-specific SDFs from foreign exchange market data. We provide out-of-sample evidence that (i) a country's interest rate is inversely related to its SDF volatility, (ii) output gap fluctuations across countries strongly correlate with estimated SDFs, and (iii) our estimated SDFs explain half of the risk in equity markets as measured by priced equity premia.

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New related paper to #21 - Momentum Effect in Commodities and #22 - Term Structure Effect in Commodities Monday, 13 April, 2015

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

Authors: Zaremba

Title: Strategies Based on Momentum and Term Structure in Financialized Commodity Markets

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2469407

Abstract:

The aim of this paper is to investigate the impact of the financialization of commodity markets on the profitability of strategies based on momentum and term structure. The performance of an array of portfolios from double-sorts on non-commercial traders’ participation, historical returns and term spreads is tested against a risk model. Both strategies reveal better performance in case of commodity markets with low financialization level and generate little profits in the markets with a significant participation of investors. The findings of this study can be used for the purposes of tactical and strategic asset allocation.

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New related paper to #12 - Pairs Trading with Stocks Wednesday, 8 April, 2015

#12 - Pairs Trading with Stocks

Authors: Xie, Liew, Wu, Zou

Title: Pairs Trading with Copulas

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2383185

Abstract:

Pairs trading is a well-acknowledged speculative investment strategy that is widely used in the financial markets, and distance method is the most commonly implemented pairs trading strategy by traders and hedge funds. However, this approach, which can be seen as a standard linear correlation analysis, is only able to fully describe the dependency structure between stocks under the assumption of multivariate normal returns. To overcome this limitation, we propose a new pairs trading strategy using copula modeling technique. Copula allows separate estimation of the marginal distributions of stock returns as well as their joint dependency structure. Thus, the proposed new strategy, which is based on the estimated optimal dependency structure and marginal distributions, can identify relative undervalued or overvalued positions with more accuracy and confidence. Hence, it is deemed to generate more trading opportunities and profits. A simple one-pair-one-cycle example is used to illustrate the advantages of the proposed method. Besides, a large sample analysis using the utility industry data is provided as well. The overall empirical results have verified that the proposed strategy can generate higher profits compared with the conventional distance method. We argue that the proposed trading strategy can be considered as a generalization of the conventional pairs trading strategy.

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New related paper to #5 - FX Carry Trade and #8 - FX Momentum Wednesday, 1 April, 2015

#5 - FX Carry Trade
#8 - FX Momentum

Authors: Olszweski, Zhou

Title: Strategy diversification: Combining momentum and carry strategies within a foreign exchange portfolio

Link: http://apps.olin.wustl.edu/faculty/zhou/O_Z_JHDF_2014.pdf

Abstract:

Hedge funds, such as managed futures, typically use two different types of trading strategies: technical and macro/fundamental. In this article, we evaluate the impact of combining the two strategies, and focus on, in particular, two common foreign exchange trading strategies: momentum and carry. We find evidence that combining the strategies offers a significant improvement in risk-adjusted returns. Our analysis, which uses data spanning 20 years, highlights the potential benefits of achieving strategy-level diversification.

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