Premium Blog

Naive performance comparisons are strong indication of lack of understanding of markets and finance in general. Here is a recent example. Comparing the performance of a financial company such as Berkshire Hathaway Inc., (BRB-K) to the performance of a technology ETF ...

A popular volatility strategy is generating a large loss year-to-date after spectacular returns last year.  This can be attributed to rising volatility and a crowded space. The general structure of this strategy was included in a premium article in December 2015. The ...

Signal-to-noise indicator for S&P 500 and SPY.

Is it better to stop mean-reversion strategies when volatility rises? We look at how the results of two mean-reversion strategies are affected after introducing volatility filters. For trading purposes (not time-series analysis) we use the 14-day ATR  expressed as a percentage ...

In 2018 there was a significant change in price action dynamics that has impacted the profitability of some trading strategies. Below is a daily chart of SPY since inception with the rolling win rate, payoff ratio and profit factor for a ...

Traders and investors are constantly bombarded by articles touting price series momentum and trend-following in equity markets. But it is possible that these claims rest on wishful thinking rather than on strategy robustness. Here is an example.

We posed a problem about a fair coin toss game that resulted in a relatively high number of engagements in Twitter and interesting discussion about trading and probabilities. The conclusion is that many traders do not understand probability.

We now have sufficient history to allow us getting an estimate of the probability of a large drawdown in U.S. stock indexes. Below are the results and our conclusions. We consider the following indexes: S&P 500 with data since 1960, NASDAQ-100 ...

Many references to increasing or decreasing volume in social media and financial sites naturally cause confusion regarding its importance in trading. Our results from a universe of 40 liquid ETFs and Dow 30 stocks point to the right answer. Before we ...

An analysis based on signal-to-noise ratio yields interesting conclusions about the future direction of the stock market. The signal to noise ratio (SNR) for a period N is defined here as the mean return divided by the standard deviation of returns ...