Previously posted:
TECHNICAL ANALYSIS
Attention Frustrated Chartists: It ain’t HFT –
it’s the Macro! – Mercenary
Trader
The Occam’s Razor explanation for why charts
have gone Daffy Duck is not because of robots, but simply because the macro
environment has been bizarre… like “unprecedented in history” bizarre. And it’s
been this way for a while now.
How You’ll Know When A Tradable Bottom Is In
Place – bclund
The only way you can recognize a market bottom
when it’s happening in real-time is to feel it… Feel is something that can’t be
taught, it has to be learned, and not everybody learns it the same way.
REGULATION
Sell-side research isn’t inside information – Felix
Salmon / Reuters
Now it’s true that the SEC does consider the news that an
investment bank is going to change its rating on a stock to be material
nonpublic information, and therefore subject to insider-trading rules. But it’s
a very weird, grey-area sort of inside information.
The undercollateralisation risk – alphaville
/ FT
Central counterparty clearing and settlement
was always intended to make the financial system safer… But there may be
unintended consequences.
A Brief History Lesson: How We Ended Glass
Steagall – The
Big Picture
It is an informative lesson in tenacity of
gradual erosion, how bank lobbyists can slowly sand away rules, with a healthy
does of regulatory capture thrown in.
HEDGE FUNDS
Dalio's World – Barron’s
Ray Dalio, fabled hedge-fund manager, says the U.S. has done a
"beautiful" job delevering, but sees a 30% chance Europe will stumble badly.
Barron’s Top 100 Hedge Funds – The
Big Picture
RESEARCH PAPERS
Asymptotically Optimal
Algorithm for Short-Term Trading Based on the Method of Calibration – arXiv
A trading strategy based on a natural learning
process, which asymptotically outperforms any trading strategy from RKHS
(Reproduced Kernel Hilbert Space), is presented. In this process, the trader
rationally chooses his gambles using predictions made by a randomized well
calibrated algorithm.
Top 10 Financial Research Papers of the Year – Mebane
Faber
STOCK MARKETS & PORTFOLIOS
S&P Overlays – Macro and Cheese
This weekend I thought we'd look at a series of
charts of the S&P overlaid with various assets or indices in order to step
back and think about what comes next.
Chart of Equal-Weight S&P500 Index vs
Market Capitalization-Weight Index – Greenbackd
Why Does an Equal-Weighted Portfolio Outperform
Market Capitalization- and Price-Weighted Portfolios? – greenbackd
Passive Asset Allocation Strategies Are Still
Tough To Beat – The
Capital Spectator
There's no reason to rely on a basic
equity/fixed income mix in a world where a wider array of asset classes are
available through low-cost ETFs.
Value-Weighted Indexing: The Problem with
Active Management –
Greenbackd
…buying an index fund is better than messing it
up yourself or getting an active manager to mess it up for you. If you’re going
to buy an index, you might as well buy the best one.
MODELING
How to Visualize and Compare Distributions – Flowing
Data
Single data points from a large dataset can
make it more relatable, but those individual numbers don't mean much without
something to compare to. That's where distributions come in.
When it is dark and you’ve lost your keys,
where do you look? Under the
streetlight. You look there not because
you think that’s the most likely spot for the keys to be; you look there
because that is the only place you’ll find them if they are there.
OTHER
Don’t Become the Market – The Aleph Blog
Anytime you get a large fraction of the
market’s volume, you should stop, and re-evaluate. You’re probably doing something wrong.
Eduardo Saverin joins the stateless
billionaires – Felix
Salmon / Reuters
The United States is the only country in the world which applies the same tax regime to
all its citizens, regardless of where they live: nowhere else are nonresidents
charged the same federal tax rate as residents.
Simple calculations suggest the total cost of
settlement failure ranges between USD$976 million and USD$2.9 billion in 39
major equity markets annually. Similar calculations for fixed income markets
suggest the total cost of settlement failure ranges between USD$308 million and
USD$925 million across 35 major fixed income exchanges annually
Someone out there is buying as many euros
against the franc as traders care to offload. Naturally, everyone is assuming
this buyer is the SNB — in disguise. And the rumoured identity of the mystery intermediary is
something of a surprise: Rabobank.
Inside the Education of a Quant – Advanced Trading
Wall Street firms may be shedding jobs, but
they still need quants. Baruch College's Jim Gatheral and
Dan Stefanica discuss what's in store for the Quant Class of 2012.