Markowitz Model

14.June 2021

We present a short article as an insight into the methodology of the Quantpedia Pro report – this time for the Markowitz Portfolio Optimization. As usually, Quantpedia Pro allows the optimization of model portfolios built from the passive market factors (commodities, equities, fixed income, etc.), systematic trading strategies and uploaded user’s equity curves. The current report helps with the calculation of the efficient frontier portfolios based on the various constraints and during various predefined historical periods. The backtests of the periodically rebalanced Minimum-Variance, Maximum Sharpe Ratio and Tangency portfolios will be available at the beginning of July.

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A Deeper Look into Factor Momentum

8.June 2021

Momentum seems to be present everywhere and based on academic studies, it is even hard to find assets where the anomaly does not work. Among the large number of research papers related to momentum, the discovery of factor momentum is still relatively new. It is a truly important finding in the world of systematic strategies – there seems to be a return continuation among factors. The novel research of Fan et al. (2021) builds on the recent academic research and shows that, after all, the factor momentum might be different. To be more precise, the authors show that looking at the universe of 20 factor strategies, the factor momentum seems to work and can span individual equity momentum strategies (standard momentum, industry momentum and intermediate momentum). However, the factor momentum is mostly driven by only six factor strategies, and the return continuation of the remaining factors is weak. Additionally, those sixteen non-return continuation strategies cannot span the momentum effects mentioned above. Therefore, the results show that the factor momentum works on the aggregate but individually works much better. In fact, the factor momentum return of the six return continuation factor is significantly better compared to the rest or buy-and-hold portfolio. Moreover, the authors have also identified that the “best” factor momentum strategy is the Betting against beta and conclude that the reason is the unique weighting scheme utilized by the factor. The beta weighting assigns a higher weight to smaller companies, where the momentum tends to be stronger. Overall, the research paper is an important extension of the factor momentum literature.

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Quantpedia in May 2021

3.June 2021

Hello all,

Let’s first very quickly recapitulate Quantpedia Premium development in the previous month: Ten new Quantpedia Premium strategies have been added to our database, and ten new related research papers have been included in existing Premium strategies during the last month. Additionally, we have produced 11 new backtests written in QuantConnect code. Our database currently contains over 440 strategies with out-of-sample backtests/codes.

And now, let’s move to our Quantpedia Pro subscription offering news – Our clients often mentioned one particular report as something they would love to see in the Quantpedia Pro – it’s the Markowitz Portfolio Optimization, and we are really happy that we can announce that it’s ready 🙂

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Measuring Financial Investors Presence in Commodities

31.May 2021

No doubt, the financialization in commodities was a significant breakpoint in markets and research as well. Many commodity strategies in Quantpedia´s screener are linked to financialization. It would be naive to think that the speculation in the commodity futures which has emerged did not influence the dynamics of the market. With the increased speculative trading, the Commodity Futures Trading Commission started collecting the net positions, but this dataset did not include all the data and often was connected with misreporting (and is not published anymore). The novel research paper of Adams, Collot and Rossi (2021) offers a different insight on this topic. It shows how to measure the influence using the term structure of commodity prices, focusing on crude oil. The authors suggest that during normal times, the term structure of crude oil futures should be smooth. They consider the term structure that starts with spot price and includes futures with one to twelve-month maturities, but they omit the one and two-month futures (since those are mostly used for speculation). The key finding is that when they estimate the missing futures based on the other prices using the smooth spline interpolation, this estimated term structure curve can be compared to the realized one. The deviation from the predicted (estimated) curve can be interpreted as the degree of speculation in commodity futures markets. As a result, with the mathematical modelling, the authors offer an interesting insight into speculation without any external datasets.

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Introducing “Quantpedia Explains” Video Series

27.May 2021

From the perspective of an indifferent observer, it seems that the world is accelerating from decade to decade. The average speed of information processing increases, and we consume more and more knowledge in a shorter and shorter amount of time. So, we have decided to start a new information stream for a people who have adjusted to this tempo.

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Pump and Dump in Cryptocurrencies

24.May 2021

It is striking how cryptocurrencies are both similar and dissimilar to the more established asset classes at the same time. On the one hand, many findings from traditional asset classes also apply to this novel class. On the other hand, this “new” world with its own characteristics brings many novel “problems” that attract researchers. This week’s blog presents several research papers connected to the pump and dump schemes in cryptos. These pumps and dumps are nothing new, and we already know them from the stock market. However, there are some notable differences…

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