- Multiplicative Process Growth is Not Necessarily Due to Bubble August 5, 2021
Growth in multiplicative processes starts slowly but after a point quickly accelerates exponentially and may offer the impression of a bubble but that is not the case necessarily. This phenomenon manifests itself in markets and if the right observable is ...
- Trading Strategy “Over-fitting” Is Not the Main Concern July 31, 2021
The same articles about trading strategy over-fitting are repackaged and served to the financial community at regular intervals. Although “over-fitting” is a valid concern, there are some other even more serious issues rarely dealt with in academic papers because they ...
- Overnight Effect in Amazon Stock July 30, 2021
Although the focus in the last few months has been on the overnight effect in SPY ETF, the same effect has been even more pronounced in Amazon stock and has even been profitable after commissions. The overnight effect in SPY has ...
- Chart of the Month: S&P 500 Vs. GDP July 27, 2021
Dual charts can be misleading but this one is revealing: S&P 500 vs. GDP. I posted the chart in Twitter after resurgence in cases of using the linear axis S&P 500 chart in scare tactics. Chart of the month This is a ...
- Fooled By Randomness: The Lumber/Gold Ratio Strategy July 24, 2021
Backtest results can fool market timers due to randomness and underestimating trading friction. An example is the lumber/gold ratio strategy where there is no alpha but also significant underperformance when compared to buy and hold and simpler alternatives. Journals and ...
- 2021 is Not as Good as 2017 July 22, 2021
Yesterday there was reference to the fact that the S&P 500 hasn’t had 5% drawdown since October 2020. This is correct but still 2021 won’t beat 2017. The chart below shows this year won’t be as good as 2017 in terms ...
- The Collapse of Correlation of S&P 500 Index With Equal Weight July 20, 2021
Yesterday some traders pointed to a chart showing a drop in the correlation of S&P 500 index with its equal weight variant to levels realized near the 2000 top. This is the chart: 0-lag, 250-day correlation of daily returns of S&P ...
- Lumber to Gold Ratio in Mainstream Financial Media July 17, 2021
Another low point in mainstream financial media with numerous articles about the lumber/gold ratio and a potential link to a correction in stock market.
- High Hit Rate Predictions of the Sign of Next Day Return July 15, 2021
On Wednesday, July 14, 2021, NASDAQ-100 long/short with directional bias had 91% hit rate from open to close. After the close of Tuesday, July 13, 2021, DLPAL LS identified 12 NASDAQ-100 stocks, nine long and three short, and correctly predicted the ...
- Systematic Trading is Hard but Discretionary is Even Harder July 11, 2021
A few excerpts from articles to our subscribers from this week on the perils of discretionary trading and looking at the wrong indicators. This past week was marked by volatility in both stocks and bonds. Many discretionary traders were squeezed in ...
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