Home

Is Pairs Trading Still Profitable?

Posted on April 26, 2024 By 
Pairs trading involves identifying two related securities, typically stocks, that have historically exhibited a strong correlation in price movements. Traders then look for deviations from this historical relationship, buying the underperforming security while simultaneously selling the outperforming one. The goal is to profit from the convergence of prices back to …
Read More

A Portfolio Construction Approach Based on Options Implied Density Distributions

Posted on April 18, 2024 By 
An investment portfolio can be constructed by using momentum, minimum-variance, or mean-variance approaches. It involves combining assets in a way that optimizes risk and return. Each approach offers its own trade-offs: momentum strategies may suffer during market reversals, while minimum-variance portfolios may underperform in strongly trending markets. Meanwhile, mean-variance portfolios …
Read More

Optimizing Portfolios Based on Hurst Exponent

Posted on April 14, 2024 By 
Portfolio optimization is an important aspect of investment management, aiming to construct portfolios that offer the best risk-return trade-off based on an investor’s objectives and constraints. Various optimization techniques, such as mean-variance optimization, Black-Litterman model, and risk parity, are employed to generate optimal portfolios tailored to different investment goals and …
Read More

Blending Low-Volatility with Momentum Anomalies

Posted on April 10, 2024 By 
The low volatility anomaly in the stock market refers to the phenomenon where stocks with lower volatility tend to provide higher risk-adjusted returns compared to their higher volatility counterparts, contrary to traditional financial theories. Various explanations have been proposed for this anomaly, including investor behavioral biases, such as overestimating the …
Read More

Is Gold a Strong Hedge and a Safe Haven Asset?

Posted on April 3, 2024 By 
Gold plays an important role as a diversifier in investment portfolios due to its unique characteristics. Historically, gold has exhibited a low correlation with other asset classes such as stocks and bonds, making it an effective hedge against market volatility and economic uncertainty. During times of economic downturns or geopolitical …
Read More

Intraday and Overnight Volatility Clustering Effect

Posted on March 30, 2024 By 
Volatility clustering is a phenomenon observed in financial markets where periods of high volatility tend to cluster together, followed by periods of low volatility. This pattern suggests that extreme price movements are not randomly distributed over time but rather occur in clusters or groups. Volatility clustering has undergone extensive study …
Read More

Avoiding Overfitting: Searching for Parameter Plateau

Posted on March 26, 2024 By 
A serious problem when designing a trading system is the overfitting phenomenon, wherein the system is excessively tuned to historical data. Overfitting occurs when a trading strategy performs exceptionally well on past data but fails to generalize to new, unseen data. This can lead to false positives and inflated expectations, …
Read More

Information Content of Leveraged ETFs Options

Posted on March 22, 2024 By 
Leveraged ETFs, or exchange-traded funds, are investment funds designed to amplify the returns of an underlying index or asset class through the use of financial derivatives and debt. These ETFs aim to achieve returns that are a multiple of the performance of the index they track, typically two or three …
Read More