Free Blog

I have heard a lot of arguments in favor or against active fund management and passive investing. I present data here that strongly suggest that passive investing in stock indices should be actually treated as an alternative investment that involves substantial risks, or ...

Joe has thought of a way that combines technical analysis indicators, exit signals, and filters of all kinds and also optimizes performance by selecting the best parameters. He further thought that if this is done in-sample historical data, followed by ...

If in business school you were taught that high positive correlation means that when one security moves, either up or down, the other security moves in lockstep in the same direction and that high anti-correlation means that when one security moves, ...

Despite the fat tails and especially the one on the left side that includes one very rare event and a few other not so very rare, the distribution of S&P 500 daily returns is  as good as it can get in a ...

In this post I introduce the general form of the Backtesting Robustness Index (BRI) I have developed and I give an example of its application to price patterns. This robustness index provides just another way of dealing with the notorious problems ...

Some traders base their trading decisions on the fallacy of the maturity of chances, also known as gambler’s fallacy. This fallacy is the expectation that the market will correct when indicators like the Relative Strength Index (RSI) assume extreme values. However, any extreme values of such ...

The SPY2p5 system, which was generated by Price Action Lab on April 7, 2012, outperformed the market in 2012 by a wide margin. The SPY2p5 system was developed on April 7, 2012 based on an in-sample period from the inception of SPY ...

This is the time of the year when performance statistics are published in the blogoshpere. One of the parameters reported is the arithmetic 1-year return for stocks, commodities, currencies, funds, etc. But what return? The details of the calculations are usually left out. Here is ...

The fundbusters team includes your familiar quant blogger, your local college professor and everyone else who can identify an edge and publish the results in a journal or in the blogosphere. As fundbusters get satisfaction from publishing edges rather than from using ...

Trend-following based on indicators and classical chart patterns are two trading methods that were developed in mid 20th century using data from the equity markets mainly. These methods worked well for an extended period of time in those markets due ...