Own-research

Multi-Asset Skewness Trading Strategy

19.August 2020

The best course of action for every quant researcher is to try to fundamentally understand anomalies and explore their functioning besides the original scope of the academic research papers. The goal of this article was to look for inspiration and further explore the Skewness affect – the tendency of assets with the lowest skewness to outperform assets with the highest skewness. It seems that this anomaly is present not only in commodities but also in currencies, fixed income and equities. Trading strategy that exploits the effect of skewness in the multi-asset setting would earn an annual return of 7.67% when leveraged to the 15% volatility.

Continue reading

The Effectivity of Selected Crisis Hedge Strategies

30.July 2020

During past months we made a set of articles analyzing the performance of equity factors and selected systematic strategies during coronavirus crisis. These articles were short-ranged with data only from the start of the year 2020, which is enough for the purpose of the quick blog posts, but very short-sighted to see the nature of these strategies. Therefore, we expanded the time range by 20 years. For a better understanding of hedge possibilities of these strategies, we have added a comparison to essential safe-haven assets, not only to equities.

Continue reading

ESG Scores and Price Momentum Are More Than Compatible

16.July 2020

What will happen if we mix ESG scoring with price momentum? Can we improve simple ESG investing strategy?

The pure price momentum can be combined with ESG scores using a Knapsack algorithm. Knapsack algorithm is a well-known mathematical problem of optimization, and in the case of momentum and ESG, can be used to make the momentum portfolios significantly more responsible, with lower volatility and better risk-adjusted return. The second option is to make the ESG portfolio substantially more profitable by using Knapsack algorithm to construct high ESG portfolio with large momentum. The approach resulted in a strategy with high ESG score and compared to pure momentum or momentum-ESG strategy, with significantly reduced volatility. Therefore, the ESG-momentum strategy has the best risk-adjusted return, the lowest drawdown, the lowest volatility and the most consistent returns.

Continue reading

YTD Performance of Crisis Hedge Strategies

25.June 2020

After a month, we are back with a year-to-date performance analysis of a few selected trading strategies. In the previous article, we were writing about the performance of equity factors during the coronavirus crisis. Several readers asked us to take a look also on different types of trading strategies, so we are now expanding to other asset classes. We picked a subset of strategies that can be used as a hedge at the times of market stress (at least, that’s what the source academic research papers indicate) and checked how they fared.

Continue reading

YTD Performance of Equity Factors – Update After Two Months

15.May 2020

Nearly two months ago, in a time of the highest turmoil during the current pandemic crisis, we performed a quick assessment of the status of performance of equity factor strategies. The world has still not been able to ward-off health-care crisis completely, but a lot of countries have made significant progress (on the other hand, there are still a lot of countries in a worse state than a few months ago). Equity indexes have rebounded from the March lows and have removed some of the losses. Therefore, we have received multiple inquiries about the current situation of equity factor strategies.

So it may be a good time to revisit once again how they are performing.

Continue reading

Backtesting ESG Factor Investing Strategies

7.May 2020

Socially Responsible Investing (also called ESG Factor Investing) grows in popularity. More and more investors enter the stock market not just to invest their savings, but they are also want to support companies that bring positive social or environmental change. ESG factor investing can bring satisfaction to those investors. But does it also brings a real outperformance in a financial sense? Is there some ESG factor alpha? How big is it? These are some of the questions we have decided to investigate – we obtained data, identified ESG factor strategies and tested them. Feel free to explore them with us…

Continue reading

Subscribe for Newsletter

Be first to know, when we publish new content


    logo
    The Encyclopedia of Quantitative Trading Strategies

    Log in