Investors and traders often suffer from behavioral biases, which is where behavioral finance originates. Among these biases, recency bias is probably the most detrimental, yet it has infrequently been studied in a comprehensive quantitative manner. Reference addresses this gap by investigating recency bias in stocks with high idiosyncratic volatility …

With the rapid advancement in computing power, quantitative researchers can now develop trading strategies quickly, employing multiple variables and methodologies. These approaches extend beyond traditional time-series and statistical models to include machine learning and AI-based techniques. However, such models often deliver impressive in-sample results but fail in live trading, largely …

The option wheel strategy is a systematic approach that combines selling cash-secured puts and covered calls. The process begins by selling puts on a stock the investor is willing to own; if assigned, the investor acquires the shares and then sells covered calls against the position to collect additional premium. …

In the financial market, seasonality refers to systematic return patterns that recur at specific calendar intervals. It has been studied extensively in the equity space, but little work has been carried out on cryptocurrencies. Reference addresses this gap. Specifically, it examines seasonality patterns of 10 major cryptocurrencies using data …

Pairs trading, or statistical arbitrage, is one of the oldest quantitative trading strategies, and it is still employed today. Over the years, it has expanded from classical distance methods to more sophisticated approaches, and practitioners have increasingly questioned its profitability. Reference provides a thorough review of the pairs trading …

Volatility plays a crucial role in trading and risk management. These days, more portfolio managers are aware of and utilize volatility measures, even if they do not trade options. For example, we have previously discussed volatility-managed portfolios, where asset volatilities are used to size positions. Reference contributes to this …

Investing in equities offers strong growth potential, but a key drawback is exposure to periodic drawdowns, which many investors find psychologically difficult to endure. To address this, some have proposed tail risk hedging strategies. However, portfolio managers are often reluctant to adopt them due to high carry costs, and researchers …

Momentum and mean-reverting approaches are two primary methods for trading linear (delta-one) assets. Their effectiveness depends on several factors, such as time horizon, investor behavior, liquidity, etc. Reference conducted a comprehensive literature review of momentum and mean-reverting approaches. It aims to answer two questions: How have momentum and contrarian …

Pairs trading is a market-neutral strategy that exploits temporary deviations in the price relationship between two historically correlated or cointegrated assets by going long the undervalued asset and short the overvalued asset, aiming to profit from spread mean reversion. There is an emerging study in the literature that highlights the …

Sentiment analysis is a growing research area in quantitative finance, especially with the advancement of Large Language Models (LLMs) and Natural Language Processing (NLP). Sentiment-based trading plays an important role in traditional finance; however, it is even more relevant in DeFi and crypto markets, which are known for their volatility …