Five new strategies have been added.
Six new related research papers have been included into existing strategy reviews and two short free blog posts have been published during last few weeks. Plus, six trading strategies have been backtested in QuantConnect in the previous two weeks.
Although the models cannot entirely capture the reality, they are essential in the analysis and problem solving, and the same could be said about asset pricing models. These models had a long journey from the CAPM model to the most recent Fama French five-factor model. However, the asset pricing models still rely on fundamentals, and as we see in the practice every day, the financial markets or investors are not always rational, and prices tend to deviate from their fundamental values. Past research has already suggested that the assets are driven by both the fundamentals and sentimen. The novel research of Koeppel (2021) continues in the exploration of the hypothesis mentioned above and connects the sentiment with the factors in Fama´s and French´s methodology. The most interesting result of the research is the construction of the sentiment risk factor based on the direct search-based sentiment indicators. The data are sourced by the MarketPsych that analyze information flowing on social media. For comparison, public news is not a source of such exploitable sentiment indicator.
The sentiment score extracted from social media can be exploited to augment the Fama French five factors model. Based on the results, this addition seems to be justified. Adding the sentiment to the pure fundamental model explains more variation and reduce the alphas (intercepts). Moreover, the factor is unrelated to the well-known and established risk factors utilized in the previous asset pricing models, including the momentum. Finally, the sentiment factor seems to be outperforming several other factors, even those established as the smart beta factors.
One of the most popular reports in the Portfolio Analysis section of our Quantpedia Pro tool is “Volatility Targeting”. In this article, we will explain some theory behind this portfolio management method. And then, we will go more in-depth, pick several examples and explain some common volatility targeting variants.
The most significant event on our page in February was the introduction of our new Quantpedia Pro platform. We have received positive feedback so far to it; therefore, feel free to revisit our short article describing the main features of this new service and its design and reporting capabilities.
But naturally, we have not forgotten to do our homework for our other services. So, let us recapitulate last month of Quantpedia’s research. 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 12 new backtests written in QuantConnect code. Our database currently contains over 410 strategies with out-of-sample backtests/codes.
Also, three new blog posts, that you may find interesting, have been published on our Quantpedia blog:
Five new strategies have been added.
Five new related research papers have been included into existing strategy reviews and two short free blog posts have been published during last few weeks. Plus, six trading strategies have been backtested in QuantConnect in the previous two weeks.
Practitioners widely use asset pricing models such as CAPM or Fama French models to identify relationships between their portfolios and common factors. Moreover, each asset class has some widely-recognized asset pricing model, from equities through commodities to even cryptocurrencies.
However, which model can we use if our portfolio is complex and consists of many asset classes? Which factors should we include and which should we omit? (Especially if we have a database that consists of several hundreds of potential factors). Additionally, we know that equities influence bonds, commodities influence equities and vice versa. Hence the question, what about the cross-asset relationships?
These are the problems and questions we faced when looking for a methodology for our Multi-Factor Analysis report in the Quantpedia Pro platform. This blog post aims to introduce the model, its logic and the method we have decided to use.
