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In hindsight, as the data reveal, the management of ARKK ETF did not use volatility targeting but instead was satisfied with a remarkable outperformance in 2022.  Due to recency bias, investors always focus on recent underperformance and forget past outperformance. I ...

Since 2002, this ETF seasonality strategy has not experienced any losing years in its backtests. We also include backtests from 1990 that use the same underlying index that the ETF tracks. Backtest Results Market: Leveraged ETF (3x) Timeframe: Daily Backtest period: 01/04/2010-12/31/2024 Backtest statistics Annualized return 13.6% Maximum ...

There is an obsession with uncorrelated returns in finance literature, but they make sense only if they improve total returns. More importantly, correlations in markets are random variables. Usually, uncorrelated returns improve risk-adjusted performance, but wealth growth depends on total ...

I made a mistake this week because I thought two superoptimists were better than one. But this is false because superoptimism is a behavioral bias at the left tail of the cognitive bias distribution and should be avoided not only ...

What is the optimal allocation to managed futures? The short answer is that any allocation can be optimal or not, because the future is unknown. Please do not read this article if you believe you can easily determine an optimal ...

The expected alpha of a trading or investing strategy can decrease significantly due to tail events, or even become negative. If there are risks of large losses, there is a high probability that the realized alpha will be much lower ...

The “turnaround Tuesday” anomaly disappears if we take into account the overnight effect and random short squeezes in bear markets. The “turnaround Tuesday” (TAT) anomaly refers to stocks bouncing back on Tuesday after a down Monday. This effect appears to be ...

Cocoa surged 25.4% this week, and it is up 106% year-to-date. Since 2023, cocoa is up 261%. Price action in cocoa has been in the tails of distribution for the better part of this year due to harvest problems and ...

We look at the contribution of commodities to the performance of a simple trend-following strategy based on price breakouts. In the last five years, commodities have significantly contributed to trend-following performance. Trend-following makes more sense with commodities. Trend-following is a simple ...

It is hard to define market bubbles. All attempts to identify bubbles are highly subjective. What is a market bubble? The common definition is that a bubble is a rapid rise in asset prices. But that is part of the story. ...