Analysis of Price-Based Quantitative Strategies for Country Valuation

18.September 2023

The motivation for this study comes from the idea of simplifying the concept of relative valuation among the countries. There exist several ideas for relative value approaches that compare the “visible price” (or market capitalization) of the stock market to some unseen “intrinsic value” of the market. The ideas of what we can use to measure the unseen “intrinsic value” of each individual country/market are numerous – it may be a number derived from GDP (like in a Buffet Indicator), total earnings of listed companies in the selected country (Shiller’s CAPE ratio), or ratios derived from yields, demographic, etc., etc. We asked ourselves – can we create a relative valuation model and use just the price data?

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Language Analysis of Federal Open Market Committee Minutes

15.September 2023

If there were a Superbowl of Finance for equities, it’d definitely be FOMC (Federal Open Market Committee) meetings. Investors and traders from around the world gather and make their decisions on the brink of releasing a statement and following the press conference. Shah, Paturi, and Chava (May 2023) contribute with a new cleaned, tokenized, and labeled open-source dataset for FOMC text analysis of various data categories (meeting minutes, speeches, and press conferences). They also propose a new sequence classification task to classify sentences into different monetary policy stances (hawkish, dovish, and neutral) and show the application of this task by generating a hawkish-dovish classification measure from the trained model that they later use in an interesting trading strategy.

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Performance of Factor Strategies in India

31.August 2023

India is a big emerging market, actually the second biggest after China. We primarily look at developed markets, mostly the U.S. and Europe, and from Emerging Markets, China at most, and we are aware that we neglect this prospective country. We would like to correct this notion and give attention to a country that is (along with China) being cited as a new potential rising superpower and already looking to take the lead of Emerging Markets (EM) countries. Today, we would like to review the paper that analyzes the performance of main equity factors (with an emphasis on the Quality factor) and is a good starting point to understand the specifics of factor investing strategies in India.

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Dissecting the Performance of Low Volatility Investing

28.August 2023

Low volatility investing is an appealing approach to compound wealth in the stock market for the long term. This particular factor investing style exploits the popular naive notion that lower (higher) risk must always equal lower (higher) overall returns. But in fact, this naive assumption is not true, as low-volatility investments often yield more than their high-volatility counterparts. While low-volatility investing has many advantages, it also results in some disadvantages. How to overcome them? Bernhard Breloer, Martin Kolrep, Thorsten Paarmann, and Viorel Roscovan, in their study Dissecting the Performance of Low Volatility Investing, propose a solution.

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Predicting Stock Market Performance with the Global Anomaly Index

22.August 2023

Today’s article focuses on investigating long-short anomaly portfolio return predictability in international stock markets, which often undergo mispricing due to investors’ sentiment. A paper by Jiang, Fuwei et al. (Apr 2023), suggests using the AAIG (Global Anomaly Index), and it examines the ability of the aggregate anomaly index to predict future returns in 33 stock markets. While previous research finds that a high aggregate anomaly measure predicts a low return in the U.S. market, this study further demonstrates that the global component of AAI (aggregate anomaly indices) is the key that drives international return predictability and reveals that the global anomaly index is a strong and robust predictor of equity risk premiums not just in the U.S. market but also in international markets, both in- and out-of-sample, consistently delivering significant economic values.

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Technical Analysis Report Methodology + Double Bottom Country Trading Strategy

13.August 2023

Some of the more vague terms in Technical Analysis are really hard to quantify as nearly every TA user defines and interprets them differently. We mean mainly TA patterns like supports, resistances, trend lines, double tops, double bottoms, and/or more complex patterns like head-and-shoulders. Now, what we can do with that? We tried to spend some time and fought a little with some of these TA terms, and the following article/study results from our attempts to quantify a tiny subset of the world of Technical Analysis patterns.

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