Can ChatGPT Predict the Stock Market?

Posted on May 31, 2023 By Harbourfront Technologies

ChatGPT is a large-scale language model developed by OpenAI. It utilizes state-of-the-art deep learning techniques to generate human-like text responses based on the input it receives. Trained on a diverse range of internet text, ChatGPT has a vast knowledge base that allows it to understand and respond to a wide …

Selecting Pairs Using Principal Component Analysis

Posted on May 28, 2023 By Harbourfront Technologies

Pairs trading is a market-neutral strategy that involves identifying two correlated securities and taking positions based on their relative price movements. The concept behind pairs trading is to identify pairs of assets that historically exhibit a high degree of correlation, meaning they tend to move in tandem. However, when a …

Gold and Low-Volatility Stocks as Diversifiers

Posted on May 22, 2023 By Harbourfront Technologies

Gold has long been regarded as a valuable diversification tool in investment portfolios due to its unique characteristics. As an asset class, gold has historically exhibited a low correlation with traditional financial assets such as stocks and bonds. This means that gold often moves independently of other investments, especially during …

Tail Risk Hedging Using Put Options: Is It Effective?

Posted on May 17, 2023 By Harbourfront Technologies

Tail risk hedging using put options is a risk management strategy employed by portfolio managers to protect against severe market downturns and mitigate potential losses. Put options are financial instruments that give the holder the right, but not the obligation, to sell an underlying asset at a predetermined price within …

Short-Selling Leveraged Exchange-Traded Funds

Posted on May 9, 2023 By Harbourfront Technologies

Leveraged exchange-traded funds (ETFs) are investment vehicles that aim to provide amplified returns for a given index or benchmark. Leveraged ETFs use financial derivatives and debt to enhance their returns, which can be either two or three times the return of the underlying index, on a daily basis. This means …

Enhancing Market Timing Strategies Through the Use of Macroeconomic Indicators

Posted on May 2, 2023 By Harbourfront Technologies

Market timing refers to the practice of attempting to predict future market movements in order to buy or sell securities at the most advantageous times. Proponents of market timing believe that it can be a highly effective strategy for generating better risk-adjusted returns, as it allows investors to take advantage …

Influencing the Markets: The Motivation of Social Media Influencers

Posted on April 26, 2023 By Harbourfront Technologies

Social media influencers have become an increasingly important presence in the financial markets in recent years. These individuals have amassed large followings on platforms such as Reddit, Twitter, Instagram, and YouTube, and they use their influence to provide investment advice and insights to their followers. Some social media influencers specialize …

Lead-Lag Relationship Between VIX ETPs and VIX Futures

Posted on April 17, 2023 By Harbourfront Technologies

VIX ETPs, such as VXX, are exchange-traded products designed to track the performance of the CBOE Volatility Index (VIX). The VIX is a measure of the expected volatility of the S&P 500 index over the next 30 days, and it is often referred to as the “fear index” because it …

How Effective Are Stop-Loss Orders?

Posted on April 8, 2023 By Harbourfront Technologies

A stop-loss order is a type of order used in trading to limit an investor’s losses or to take a profit. It is an instruction to sell a security when it reaches a certain price level, known as the stop price. When the stop price is reached, the stop-loss order …

How Reliable Is Out-of-Sample Testing?

Posted on March 24, 2023 By Harbourfront Technologies

Out-of-sample testing is a critical component of designing and evaluating trading systems. Trading systems are often developed and optimized using historical data, which can lead to overfitting – a situation where the system is excessively tuned to past data, resulting in poor performance on new, unseen data. Out-of-sample testing involves …