Asset allocation

A Balanced Portfolio and Trend-Following During Different Market States

19.December 2022

What’s the performance of a balanced portfolio during rising rates? How does it behave when inflation is high? What about a combination of these market states? And how do trend-following strategies fare in such an environment? These and even more questions we will attempt to resolve in our today’s article. We will be looking at different market cycles and how a balanced portfolio and a typical trend-following strategy perform over these different market states.

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100 Years of Historical Market Cycles

16.December 2022

Which assets perform best when rates are rising, and inflation is high? And what happens if rates are still rising but inflation is already falling? And what’s the impact of the business cycle? These are the questions that everyone is currently trying to answer. Today, we will start a longer series of articles with the goal of giving an exact quantitative answer to all questions related to cycles in inflation, interest rates, and economic growth. This series of articles can also serve as an introduction to the methodology that we will use in the upcoming Quantpedia Pro report.

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Stock Returns vs Inflation Expectations

14.December 2022

What happens to the stock prices when inflation expectations decrease or increase? The authors Manav Chaudhary and Benjamin Marrow, in their paper Inflation Expectations and Stock Returns, explore this topic and find that when inflation expectation is high, stock prices also rise in their value. The evidence they present suggests that stocks have been a hedge against expected inflation for the last couple of decades and that this effect is present across stocks from all industries.

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Quantum Computing as the Means to Algorithmic Trading

9.December 2022

The topic of quantum computing has been gaining popularity recently, and both the scientific community and investors seem to have high hopes for its future. It seems that this brand-new technology could revolutionize various aspects of computing as we currently know them. Great contributions could be made in the fields of medicine and healthcare, security, and computability [1], as well as in the field of finances, which interests us here at Quantpedia the most. Quantum computers are especially great in optimization tasks, so optimizing a portfolio could be one of the key contributions in our interest. [2] In this article, we would like to introduce the concept of quantum computers, their current state, their potential use in finance, and more.

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Investing in Deflation, Inflation, and Stagflation Regimes

16.September 2022

Investing has been a reliable way to compound one’s inheritance over ages known throughout human history. But different monetary and fiscal situations, especially during times of uncertainty and extreme stress, force both individuals and institutions to adjust their financial habits. A recent research paper written by Guido Baltussen, Laurens Swinkels, and Pim van Vliet analyzed large samples of data starting from the 19th century and brought unique perspectives on how various asset classes perform during “quiet, good” periods and, on the other side, economic turmoil. Research summarized very actual topics of investing during those different cycles and what inflation does to returns across equities, bonds, and cash.

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100-Years of the United States Dollar Factor

16.August 2022

Finding high-quality data with a long history can be challenging. We have already examined How To Extend Historical Daily Bond Data To 100 years, How To Extend Daily Commodities Data To 100 years, and How To Build a Multi-Asset Trend-Following Strategy With a 100-year Daily History. Following the theme of our previous articles, we decided to extend historical data of a new factor, the Dollar Factor. This article explains how to combine multiple data sources to create a 100-year daily data history for the Dollar Factor (the value of the United States Dollar relative to its most important trading partners’ currencies), introduces data sources, and explains the methodology.

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