130/30 Strategy BacktestedDisagree with comparison of 130/30 to non-leveraged benchmark/strategy. Also, the additional longs didn't improve the long portion of the 130/30 returns compared to the long-only strategy returns. Am I missing something? |
The critical ingredient is a maverick mind. Focus on trading vehicles, strategies and time horizons that suit your personality. In a nutshell, it all comes down to: Do your own thing (independence); and do the right thing (discipline). -- Gil Blake
Showing posts with label investing. Show all posts
Showing posts with label investing. Show all posts
Wednesday, September 19, 2007
Recent Links for 09/19/2007
Monday, September 17, 2007
Recent Links for 09/17/2007
Thursday, September 06, 2007
Tuesday, September 04, 2007
Recent Links 09/04/2007
World Beta - Engineering Targeted Returns and Risk: More On The Endowment Style Of Investing Annotated
- World Beta shares some links covering the endowment investing side of things...
- A link to Frontier Capital Management- check out their knowledge section for more great papers similar to the ones Faber links to.
- Faber mentions a great upcoming book covering the twelve top endowment CIO's .
- from Alpha Magazine...Highbridge Capital Managment shares its office organization - putting traders and developers together. I've always thought this would be a great idea in any shop. By putting users and developers together - manual taks can be seen and automation can happen.
- A link to
- Great little file compare utility. Graphic front end to the diff program.
note: tested this today against a large file/program (well, not that large in my line of work...but I guess to Google's)...couldn't handle it. But, works great on small files.
- post by taylortree
Google Mondrian: web-based code review and storage
- Online code review that works like a blog/wiki. I wonder...is it possible to create a code review system similar to Mondrian within a source management toolset such as subversion? Seems like most of the backend is there already...would only need to add some front end tools to display the changes being committed and allow comments on those changes.
- post by taylortree
Wednesday, August 15, 2007
Investor or Gambler?
Tom from InvestorGuide.com sent me an article of his to read regarding the differences between investing and gambling. Tom did a great job in discussing the two terms fairly. Very hard to write an article like that without exposing unknown biases.
I did find a couple of very minor areas where I disagreed with Tom's article. I shared those comments to Tom in an email. But, felt those comments would be helpful to readers of this site. First read Tom's article. Then my comments below...
Later Trades,
MT
I did find a couple of very minor areas where I disagreed with Tom's article. I shared those comments to Tom in an email. But, felt those comments would be helpful to readers of this site. First read Tom's article. Then my comments below...
Tom's article:
There's a big difference between buying a stock after thoroughly researching it and buying a stock by hitting it on a dartboard.
My comments:
Is there really a big difference...in outcome? Sure, the person may feel different about the investment...but based on outcome alone...historical evidence would suggest the odds of success are approximately the same.
Tom's Article:
Gambling - "Any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following...no net economic effect results."
My comments:That's it from here where I've got a softball game to prepare for this week. I haven't played softball since my college days. And haven't thrown many balls since my shoulder surgery. Should be an interesting show to say the least.
I would argue that each player in the stock market provides a positive economic effect. The investor provides long-term capital to companies in need of capital. The speculator and gambler provide liquidity. Sure there are negative effects from all players...investors prop up some companies that probably shouldn't receive further funding...and will eventually go bust. And speculators/gamblers can turn liquidity into a frothing market that can cause long-term problems after the swell has subsided.
Of course, your point is true that gamblers' short-term trades may be a net effect with each other...but that activity regardless of reason or length of hold...still provides liquidity for other players in the market.
Basically, remove any player from the game...and the market wouldn't be what it is.
Later Trades,
MT
Saturday, June 09, 2007
Weekend Readings - Search for Alpha
Sharing some great links found this morning while enjoying a Starbucks coffee and Krispy Kreme doughnut. :-)
A great Quantitative Primer from the Bionic Turtle.
Nice little profile on Parametric Portfolio Associates by Bloomberg Markets Magazine. I enjoyed reading their rebalancing alpha along with their contrarian weighting of individual stocks for each country. In fact, check out Parametric's Research & Whitepapers area...great information to be had. Their paper on Using Statistical Process Control to Monitor Active Managers is one to read a few times this weekend.
One view shared by Parametric coincides with my recent testing of alpha filtering in the U.S. Equities market. Parametric found that smaller countries exhibit less correlation to the broader markets. My guess is due to less investor attention, liquidity issues, and such. In essence the markets are less efficient which enable Parametric to extract alpha (non-commoditized beta) by overweighting these smaller countries in their portfolio compared to the index they track. I found that by increasing the frequency in my alpha calculations...the fewer stocks I found that could beat the market (high alpha). Increasing the frequency to daily in my alpha filter picked up only the most illiquid stocks in the market out of the 20,000 stocks in my database (including the delisted). What does this mean? These stocks are the less followed? Less efficient? Their returns are least effected by the broad market? Short-term...all other stocks are governed by the overall market returns? Only if you extend your time horizon do stocks capture more alpha from the market? My recent testing shows this to be a possibility.
So, what should an investor/trader do? Well, if you're a daytrader, you should pay much more attention to the market in general. The market acts as a powerful force in a stock's short-term returns. If you're an investor...extending your time horizon months if not years is a way to capture more (alpha) than the market gives (beta) to each individual stock. Think about it...anywhere the market is efficient...the market governs the behavior. Only when you drive outside of that efficient zone do you capture non-market behavior. Holding stocks for the very long-term is one road outside of the city.
World Beta finds an interview with Harvard's Endowment manager,El-Erian. El-Erian claims his biggest challenge is overcoming the popularity of the endowment model. Which I tend to agree.
Finally, for you R fans out there...check out the Econometric tools for performance and risk analysis created by Brian G. Peterson and Peter Carl. Need to calculate the Information Ratio, Sharpe Ratio, Sortino Ratio, max drawdowns, rolling returns, CAPM, Kelly Ratio, and Omega on your portfolio's returns? Then this PerformanceAnalytics package could be just the ticket. I have yet to work with this feature-rich package...but have it on my list of to-do's over the coming weeks.
That's it from TaylorTree...where the weather is beautiful, coffee is great, and I've got an afternoon of fishing in my future.
Later Trades,
MT
A great Quantitative Primer from the Bionic Turtle.
Nice little profile on Parametric Portfolio Associates by Bloomberg Markets Magazine. I enjoyed reading their rebalancing alpha along with their contrarian weighting of individual stocks for each country. In fact, check out Parametric's Research & Whitepapers area...great information to be had. Their paper on Using Statistical Process Control to Monitor Active Managers is one to read a few times this weekend.
One view shared by Parametric coincides with my recent testing of alpha filtering in the U.S. Equities market. Parametric found that smaller countries exhibit less correlation to the broader markets. My guess is due to less investor attention, liquidity issues, and such. In essence the markets are less efficient which enable Parametric to extract alpha (non-commoditized beta) by overweighting these smaller countries in their portfolio compared to the index they track. I found that by increasing the frequency in my alpha calculations...the fewer stocks I found that could beat the market (high alpha). Increasing the frequency to daily in my alpha filter picked up only the most illiquid stocks in the market out of the 20,000 stocks in my database (including the delisted). What does this mean? These stocks are the less followed? Less efficient? Their returns are least effected by the broad market? Short-term...all other stocks are governed by the overall market returns? Only if you extend your time horizon do stocks capture more alpha from the market? My recent testing shows this to be a possibility.
So, what should an investor/trader do? Well, if you're a daytrader, you should pay much more attention to the market in general. The market acts as a powerful force in a stock's short-term returns. If you're an investor...extending your time horizon months if not years is a way to capture more (alpha) than the market gives (beta) to each individual stock. Think about it...anywhere the market is efficient...the market governs the behavior. Only when you drive outside of that efficient zone do you capture non-market behavior. Holding stocks for the very long-term is one road outside of the city.
World Beta finds an interview with Harvard's Endowment manager,El-Erian. El-Erian claims his biggest challenge is overcoming the popularity of the endowment model. Which I tend to agree.
Finally, for you R fans out there...check out the Econometric tools for performance and risk analysis created by Brian G. Peterson and Peter Carl. Need to calculate the Information Ratio, Sharpe Ratio, Sortino Ratio, max drawdowns, rolling returns, CAPM, Kelly Ratio, and Omega on your portfolio's returns? Then this PerformanceAnalytics package could be just the ticket. I have yet to work with this feature-rich package...but have it on my list of to-do's over the coming weeks.
That's it from TaylorTree...where the weather is beautiful, coffee is great, and I've got an afternoon of fishing in my future.
Later Trades,
MT
Sunday, May 20, 2007
Weekend Linkfest!
The Beta in Alpha's clothing? (pdf) Bridgewater Associates' detail how various hedge fund's are charging Alpha prices for Beta returns.
How to differentiate Alpha from Beta in those hedge funds? Check out AllAboutAlpha's post titled, Mommy, Where do alphas come from? AllAboutAlpha does a great job of summarizing Andrew Lo's paper, Where Do Alphas Come from?: A New Measure of the Value of Active Investment Management. Lo explains how to differentiate active returns from passive and more importantly what value the active returns add to the total returns of the portfolio. Cool stuff!
Very interesting draft, When Do Stop-Loss Rules Stop Losses?, by Kathryn M. Kaminski and Andrew W. Lo. They find stop-losses improve returns and reduce volatility compared to buy & hold. And stop-out periods were distributed uniformly over time versus only during small market crashes.
MOSERS discusses how to handle residual cash in a portfolio in the following newsletters, Rebalancing and Cash Securitization and Rebalancing II. I was shocked to discover how big of an impact residual cash had on my returns during my market studies. A cash drag indeed! Very important to get that cash, no matter how small, back into the market in order to generate further market returns.
Enjoy your week!
MT
How to differentiate Alpha from Beta in those hedge funds? Check out AllAboutAlpha's post titled, Mommy, Where do alphas come from? AllAboutAlpha does a great job of summarizing Andrew Lo's paper, Where Do Alphas Come from?: A New Measure of the Value of Active Investment Management. Lo explains how to differentiate active returns from passive and more importantly what value the active returns add to the total returns of the portfolio. Cool stuff!
Very interesting draft, When Do Stop-Loss Rules Stop Losses?, by Kathryn M. Kaminski and Andrew W. Lo. They find stop-losses improve returns and reduce volatility compared to buy & hold. And stop-out periods were distributed uniformly over time versus only during small market crashes.
MOSERS discusses how to handle residual cash in a portfolio in the following newsletters, Rebalancing and Cash Securitization and Rebalancing II. I was shocked to discover how big of an impact residual cash had on my returns during my market studies. A cash drag indeed! Very important to get that cash, no matter how small, back into the market in order to generate further market returns.
Enjoy your week!
MT
Saturday, April 28, 2007
Sky is Falling...
According to this article, Jeremy Grantham believes the sky is falling.
Grantham's bold statements and subsequent hedging of bets is something a lot of market pundits do. This allows them to zig and zag at the same time. If the market goes down big, Grantham claim's victory. If the market goes up big, Grantham claim's victory. A win-win scenario.
This type of hedge may prove useful in other pursuits. For example, wouldn't it be nice to lead a programming project and hedge the timeline of the project?
Well, that's it for me this Saturday morning. I'm taking my daughter fishing today. Of course, the fishing trip may be delayed or cancelled if changes in the Earth's atmosphere produce drops of water from the sky. ;-)
Later Trades,
MT
"The bursting ofBut, plenty of hedging is done as to the timing of the fall.this bubble will be across all countries and all assets, with the probable exception of high-grade bonds," Grantham warned. "Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity."
As for timing, he (Grantham) concedes that's impossible to predict. But here's the kicker: Even Grantham thinks you probably need to be bullish right now. The reason? Most bubbles, he notes, go through a short but dramatic "exponential phase" just before they burst. Like Japan in 1989 or the Internet in early 2000.How does this type of prognostication help anyone...I asks ya's?
Grantham's bold statements and subsequent hedging of bets is something a lot of market pundits do. This allows them to zig and zag at the same time. If the market goes down big, Grantham claim's victory. If the market goes up big, Grantham claim's victory. A win-win scenario.
This type of hedge may prove useful in other pursuits. For example, wouldn't it be nice to lead a programming project and hedge the timeline of the project?
Yes, we will make the May 1st deadline unless we don't.The above statement doesn't work because it's not wordy enough. Too simple...straight to the point.
We fully expect to meet the May 1st deadline. All components have been reviewed, tested, and verified to meet our stringent requirements. But, there is always the case that problems may arise due to circumstances outside our control. These problems may impact our schedule and possibly result in extending the deadline.There, that's better. A great hedge!
Well, that's it for me this Saturday morning. I'm taking my daughter fishing today. Of course, the fishing trip may be delayed or cancelled if changes in the Earth's atmosphere produce drops of water from the sky. ;-)
Later Trades,
MT
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Offers R language modules to...
- calculate periodic returns
- retrieve historic quotes from Yahoo, Google, FRED
- there's even a tradeModel that looks interesting
- and well documented.
- post by taylortree