- Adjusted Vs. Unadjusted Data August 9, 2015
Yes, this is a heated subject but I hope that the example from recent SPY data will convince you that there is no easy answer. The other day I wrote an article to demonstrate that traders often attribute timing ability to ...
- Perils of Asset Allocation Models July 20, 2015
Asset allocation models based on moving averages are usually sold on the basis of historical outperformance of the S&P 500 total return at reduced risk.
- Selection Bias and Momentum Strategies July 16, 2015
Momentum strategies are popular because they are supposed to generate excess alpha at lower risk. However, as in the case with traditional trading strategies, momentum represents just another method that must be tested for significance and, more importantly, for intelligence ...
- Are Historical Data Prior to 2000 Obsolete for Developing Trading Systems? July 7, 2015
Some quants have claimed that data prior to 2000 is obsolete for the purpose of trading system development. Is historical data prior to 2000 obsolete? As posed, this question is too broad. After all, data is data, and the more data ...
- Switching From Stocks to Bonds Based on a 200-day Moving Average Crossover July 1, 2015
I offer analysis in this blog motivated by a reply to a tweet I made yesterday regarding the essence of the 200-day moving average. I show that the choice of a 200-day moving average for the purpose of stock-bond allocation is sub-optimal. ...
- When Random Traders Profit, It is Hard to Prove Skill June 29, 2015
It is shown that random, long-only position trading in SPY based on a biased coin has resulted in 100% winners. The simulation results also confirm that proving trading skill requires returns in excess of buy and hold return.
- Developing Trading Systems Based on a Large Number of Price Patterns June 17, 2015
Suppose that you have a large number of price patterns that you have tested and decided to trade. How do you develop a trading system based on them? Apparently, there are many ways of doing this that offer increased flexibility ...
- Fooled by backtested ETF Rotation Strategies [Premium Articles] June 6, 2015
Strategies based on ETF rotation schemes are popular. Most of these strategies suffer from hindsight and do not account for market impact. Therefore, they are not statistically significant, i.e., most of these strategies are random. In addition, these strategies often hide ...
- The Stock Market Trend is Still Strong According to Kelly Leverage June 3, 2015
Optimal leverage for continuous rebalancing of a passive SPY tracking strategy is still above its longer-term mean and far from trend reversal trigger levels.
- Profiting From the Losers May 18, 2015
Trading system developers usually look for profitable algos that stay profitable but one could instead look for profitable algos that have high probability of turning unprofitable and then trade against them during a period of mean-reversion. Instead of trying to identify ...
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