Two weeks ago, we promised you a surprise, and now it’s finally time to unveil what we have prepared for you :).

Our Quantpedia Awards 2024 aims to be the premier competition for all quantitative trading researchers. If you have an idea in your head about systematic/quantitative trading or investment strategy, and you would like to gain visibility on the professional scene, then submit your research paper, and you can compete for an attractive list of prizes. All info about the prizes, submission process, expert committee, and our partners are described in detail on our dedicated subpage: Quantpedia Awards 2024. But we will also give you a quick overview in this blog post.

The primary motivation behind our study stems from an observation of the Global Tactical Asset Allocation (GTAA) strategies throughout the existing papers – the majority of them require relatively frequent rebalancing from the point of view of the ordinary investor. Portfolio rebalancing is usually done on a weekly or monthly basis, and while this period may seem overly boring and slow for the majority of traders (who like to trade on intraday or daily basis), fans of GTAA strategies are not traders; they are investors. Of course, some like to follow the ebbs and flows of the market. But a lot of investors just want to have a life. The financial market is not their hobby. However, on the other hand, they also do not want to hold just the passive buy & hold portfolio. Recognizing the demand for the semi-active strategy, we introduce our novel Pragmatic Asset Allocation.

Investing in emerging markets (EM) or developed markets (DM) outside of the United States tends to follow cyclical trends. At times, it becomes popular and crowded to focus solely on U.S. stocks, while in other periods, the trend shifts to favor everything except U.S. equities. This inclination often relies on historical and past performance data, although it doesn’t guarantee identical outcomes in the future. But what drives these periods of popularity? When do U.S. markets outperform Emerging Markets or other Developed Markets? When do large-cap stocks outperform small-cap stocks, and when do growth stocks outperform value stocks? Are those ebbs and flows in the performance of major thematic investments somehow interlinked, and can we uncover some insights into why this occurs? Those are the questions we will try to answer in the following analysis.

What does one of the most popular and well-known metrics, VIX, tell us about future returns? Academic research (Bansal and Stivers, July 2023) shows that a common, intuitive 20/80 thumb rule can be applied as time-variation in the returns earned from equity-market exposure can be explained well by a simple 2-term risk-return specification, which predicts (1) much higher returns 20% of the time following after VIX exceeds a high threshold at around its 80th percentile and (2) lower excess returns following a high market sentiment. They argue that VIX and market sentiment tend to measure complementary aspects of risk: the level of risk (VIX) and the price of risk or risk appetite (sentiment), and that, thus, both terms should be accounted for when evaluating time variation in the equity market’s risk premium.

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.

Seasonality effects, one of the most fascinating phenomena in the world of finance, have captured the attention of investors and researchers worldwide. Since these anomalies are often driven by factors other than general market trends, they usually don’t correlate strongly with market movements, which can help reduce the portfolio’s overall risk. Following the theme of our previous article Are There Seasonal Intraday or Overnight Anomalies in Bitcoin?, we decided to extend the data and conduct a more in-depth analysis of our earlier findings. This article explores potential seasonal patterns related to Bitcoin, focusing on whether these patterns are influenced by factors such as current market trends or the level of volatility in the market.