In a previous post, we presented a time series analysis of the SP500 index and demonstrated its mean-reverting and trending behaviour. Subsequently, we designed trading strategies exploiting these mean-reverting and trending properties of SP500. Does this mean that the SP500, and stock market indices in general, can be predicted? In …

In a previous post, we demonstrated the mean-reverting and trending properties of SP500. In this follow-up post, we will develop a simple trading system exploiting the mean-reverting behaviour of this market index. To generate buy and sell signals, we will use simple moving averages as noise filters. The simple moving …

A technical or quantitative trading system on a linear (i.e. delta 1) instrument is basically a bet on the autocorrelation of the underlying. The autocorrelation properties of the underlying can be examined directly through autocorrelation functions or indirectly through the Hurst exponent. In this post, we are going to examine …

Historical volatility (HV) is a useful measure to gauge market uncertainty. Recall that, In finance, volatility (usually denoted by σ) is the degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market …

In the previous installments, we presented the concept of Modern Portfolio Theory. We also provided an optimization algorithm, written in Python, for searching for the optimal portfolio. To continue, we are going to perform some numerical experiments. Specifically, we are going to use the portfolio optimization program developed in the …

In the previous installment, we presented a description of the Model Portfolio Theory and provided a concrete example in Python. We also explained the concept of an Efficient Frontier and provided a visual presentation of it. Recall that, … the efficient frontier (or portfolio frontier) is an investment portfolio which …

Convertible bonds are complex, hybrid securities. In finance, a convertible bond or convertible note or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock …

Modern Portfolio Theory (MPT) is a theory developed by Harry Markowitz in 1952, which later earned him a Nobel Prize in Economics. The theory states that investors can create an ideal portfolio of investments that can provide them with maximum returns while also taking an optimal amount of risk. The …

In a previous post, we presented statistical tests for the Australia/Canada country ETF pair. Specifically, we calculated the return correlation and performed cointegration tests using a training set consisted of 8 years of data. The high correlation and the fact that the pair spread passed 2 cointegration tests made this …

Harry M. Markowitz is the founder of Modern Portfolio Theory (MPT) which originated from his 1952 essay on portfolio selection. He was later awarded a Nobel Prize in Economics. His work founded the concept of an efficient frontier, and it allows for the determination of portfolio mixes that provide an …