ETF Prophet

One of the most important measures in finance is the notion of a central tendency. This is used in some form in both statistical applications and also in technical indicators. The most basic example is the mean– or the simple average of a set of data points. Other measures include the median– the middle or [...]

“The risk of a portfolio is not a linear function of the vector of its components. Rather, the variance of a portfolio is a quadratic function of its composition. This thwarts the intuition of most Analysts and Investors. Indeed, the nature of risk may be the single most important argument for the use of quantitative [...]

Investors and traders often take a one-dimensional view of time frames in the stock market. The media pundits often refer to the fact that it is a “bull” or “bear” market as if there was only one time frame required to make such an assertion. Contrast that with the fact that both traders and investors [...]

Jack Welch is one of the most recognizable names in business as the former CEO of General Electric. His skills and leadership in running one of the largest companies in the world have been the source of numerous books and case studies in the business literature. Running such a large corporation like GE that makes [...]

A desirable goal of relative strength investing or any type of portfolio algorithm would be to track the best stock/asset from a group of stocks/assets in hindsight. In other words, we wish to use an approach that can “follow the leader.” This goal is a close relative of universal portfolio algorithms (see Universal Portfolios http://www.stanford.edu/~cover/portfolio-theory.html  that [...]

I was very sad to hear the news that Steve Jobs- the  former CEO of Apple Computer– passed away today.  His life was an incredible story of innovation, and the ability to triumph in the face of constant adversity. The legacy that he left cannot possibly be missed– you can’t walk outside or inside for [...]

I will preface this post by saying that this is a concept that I have not yet had a chance to test out. That said, I usually start first with a theory or a logical observation and proceed to creating a quantitative method to capture that insight. The concept relates to everyone’s favorite topic–relative strength [...]

There is an interesting relationship between the “risk-free” rate (t-bill rate) and the benefits of diversification. When rates are close to zero, the risk reduction benefits from low or anti-correlated assets can offset the requirement for those assets to have a sufficient expected return to make diversification practical for enhancing risk adjusted returns. This extends [...]

I read an article that Goldman Sachs’ flagship “Global Alpha”  fund http://www.cnbc.com/id/44545789  was closed today following some hefty losses this year.  To many it is a dark day for quantitative trading/investing when the so-called “best and brightest” are hanging up their gloves. I wouldn’t read too much into this because Goldman likely saves its best and [...]

With so many comments and questions regarding the last post http://cssanalytics.wordpress.com/2011/08/09/forecast-free-algorithms-a-new-benchmark-for-tactical-strategies/ , I decided to take the unusual but more functional approach of writing a FAQ to address these issues for both those that were kind enough to  make intelligent contributions and to new readers. Note that it was brought to my attention that fellow [...]

We all spend most of our time creating strategies with the promise of “alpha”—excess returns adjusted for risk to some benchmark. The most desirable strategies for many traders/investors are tactical asset allocation models because they are easy to implement and tend to be more reliable than capitalizing on short-term effects that are constantly in flux. [...]