- CTAs Ask Investors to Be Patient March 26, 2023
A 9-sigma drop in the SG CTA index on March 13, 2022, coincided with a 10-sigma rise in the 2-year U.S. T-Note and caused significant losses to some managed futures CTAs. The SG CTA index is down about 5.3% year-to-date and ...
- The Three Types Of Backtests According to Clifford Asness March 21, 2023
In a recent podcast, Clifford Asness, who cofounded AQR Capital Management, mentioned three types of backtests, all quants should be aware of. The podcast was one of the best in quantitative finance and I highly recommend it. I will not say ...
- Managed Futures Replication Strategy March 18, 2023
Our strategy for CTA replication (REPA) does not rely on an index to replicate the performance. It is a bottom-up replication strategy instead of a top-down one. Most of the time, CTA replication strategies use statistical analysis or machine learning to ...
- 9-Sigma Event In Managed Futures March 17, 2023
On Monday, March 13, 2023, managed futures CTAs faced a 9-sigma event and their worst losses since 2000. Edit on March 18, 2023, due to some comments in tweets: “The standard deviation formula is never wrong; it is what it is. What ...
- Update on the CTA Replication Project March 16, 2023
Our CTA replication strategy is down 5.8% year-to-date, versus a 10.4% loss for the DBMF ETF and a 9.4% loss for the CTA ETF. The KMLM ETF is down 3.7% year-to-date. Our strategy (REPA) does not rely on an index to ...
- Managed Futures Replication Under Stress Due to Tail Risk March 14, 2023
Recent tail risk events and how fixed-income markets reacted to them have put pressure on managed futures replication. The S&P 1500 banking sector index has plunged 14% in the last two trading days (Friday, March 10, and Monday, March 13, 2023). As ...
- Dual Momentum Post-Publication Performance March 10, 2023
The dual momentum strategy was described in papers and in a book published in 2013. Post-publication analysis shows a significant deterioration in performance. We attribute the performance deterioration to selection bias and regime changes. This article is along the lines of ...
- Risk Vs. Uncertainty and the Illusion of Control March 6, 2023
Trading and investing are complicated topics where people have an illusion of control over risk and often confuse risk and uncertainty. In financial markets, the risk usually comes from not getting the expected return, alpha, or risk-adjusted return, hitting uncle point, ...
- The Golden Pliers Pattern March 3, 2023
If there is a vomiting camel pattern, we should also have a golden pliers pattern, the one that formed in the S&P 500 a few days ago and as of the close of March 2, 2023. This is the chart with ...
- Golden Cross: How to Destroy Profitability For Small Risk-Adjusted Gains March 2, 2023
The golden cross moving average signal, when applied to the S&P 500 index, has provided slightly better risk-adjusted returns but at the cost of destroying profitability. A golden cross (the 50-day moving average crossing above the 200-day moving average) occurred in ...
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