Enjoy the two attached videos: one is a lecture on momentum strategies, while the other one is Palantir's example of building a value/momentum trading system.
Yesterday on MoreLiver’s:
EUROPE
Who gained the most from the euro? And does it
matter? – Wonkblog
/ WP
It’s the Exchange Rate, Stupid – Rebecca
Wilder / EconoMonitor
I conclude that it’s the depreciation of the
real exchange – the 12.7% nominal depreciation of the euro against the dollar,
for example, and/or falling relative price levels with extra-EA economies -
that’s the primary driver of the improving trade balances in key periphery
markets.
With the Socialists now in control of the
presidency, the National Assembly, and almost all subnational governments, France is now witnessing a
concentration of power that is unprecedented in its republican history. But the
country's greatest concerns can still be resolved solely within the EU – and
only if the EU survives.
Mariano Rajoy walking a fine line – Sober
Look
Finland is preparing for the break-up of the eurozone, the country’s foreign
minister warned. (see
my earlier post
for the aftermath links in Finnish)
STOCK MARKET
A Really Low VIX Doesn’t Mean It Can’t Go Lower – MarketBeat
/ WSJ
Why VIX Is So Low, And What Comes Next? – ZH
Why VIX Is So Low, And What Comes Next? – ZH
The decline of “real money” trading – alphaville
/ FT
But whatever the cyclical or seasonal drivers
of recently declining volumes are, the stuctural forces — mainly electronic
trading and market making, including high-frequency trading, and the rise of
ETFs — have contributed to higher volumes over the past decade. Suggesting the
possibility that as (or if) the cyclical factors fade away, volumes might
continue their upward trend from before the crisis.
(also excerpts
from a Credit Suisse Trading Strategy note)
Generating Investment Ideas: Interview with
Futurist David Houle
– CFA
Institute
What actually predicts the stock market? – Macrofugue
REGULATION
Derivatives industry no likey new margin
requirements – alphaville
/ FT
A survey of financial market participants most
likely to be negatively affected by new regulations on uncleared swap trades
revealed that they don’t like this new-fangled way of doing things at all.
A word about banks and the laundering of drug
money – Golem
XIV
Drug money, criminal at the start, is criminal
and dirty no matter how many times it is laundered. The bankers know this
better than anyone. Yet they do it every day, every week, every year and every
decade in every major financial centre and everyone knows it.
Bayou's Ponzi, Vodka And Cocaine, Murder, And
Frontrunning The Fed's "Secret" Bond Market – ZH
Think the attempted fake suicide by Bayou
Capital's Sam Israel which dominated the headlines for a few days in 2008 was
strange? You ain't seen nothing yet: as the following excerpt of Octopus, The
Secret Market And The World’s Wildest Con by Guy Lawson via the Daily Mail
explains, that was merely the anticlimatic culmination of an amazing tale of
bogus London traders, 'secret' Bond markets, frontrunning the Fed, fake CIA and MI6 spies, ponzi schemes and
staged murders.
Supervisory guidance for managing risks
associated with the settlement of foreign exchange transactions – BIS
Since the BCBS's Supervisory guidance for
managing settlement risk in foreign exchange transactions (2000) was published,
the foreign exchange market has made significant strides in reducing the risks
associated with the settlement of FX transactions. Substantial FX
settlement-related risks remain, however, not least because of the rapid growth
in the FX trading. (Full
pdf)
Swiss banks are turning over thousands of
employee names to U.S. authorities as they seek leniency for their alleged role
in helping American clients evade taxes, according to lawyers representing
banking staff.
Goldman Sachs, the Symbol and Essence of What
Went Wrong with Western Capitalism – James
Anderson / QFinance
No Criminal Case Is Likely in Loss at MF Global – DealBook
/ NYT
Jon Corzine Will Not Only Not Face Prosecution,
But May Be Launching A Hedge Fund Imminently – ZH
Barclays and Libor, the MPs’ report – alphaville
/ FT
Saving the banks, but not reckless bankers – voxeu.org
How to save the banks but not the bankers? This
column argues that fines for criminal behaviour in banks are not enough – it
may be time to start locking people up.
HEDGE FUNDS
"Pre-crisis, there were three basic types
of global macro players. There was Old School Macro. Think..." – alphaville / FT
Why are Global Macro hedge funds struggling? – Behavioral
Macro
Dow Theory of Macro Trading – Macro
Man
Complete Q2 Hedge Fund Holdings Summary – ZH
ECONOMY
The “beautiful” deleveraging – Lighthouse
IM
While Mr. Dalio’s narrative reads well, it
doesn’t stand up to common sense. Unfortunately there is lingering suspicion
his views on government spending are a mere ploy to advocate fore transferring
even more debt from “his” sector onto taxpayers, while at the same time
transferring taxpayers’ money to his firm via tax breaks.
Labour productivity vs demographics – alphaville
/ FT
Interactive overview of global house prices
and rents – The
Economist
Global house prices: Searching for solid ground – The Economist
An era of frothiness is over
CENTRAL BANKING
Will Bernanke Bail Out An Incompetent Congress
Once More – ZH
Excerpt from
Citigroup’s recent To QE Or Not QE
Alan Greenspan on His Fed Legacy and the
Economy – Businessweek
Google searches give central banks new tool – SFGate
Central Bank Balance Sheets and Inflation – econbrowser
Given several prominent policymakers have
worried about central bank actions leading to high inflation, it seems
reasonable to see how expansions in central bank balance sheets correlate with
inflation.
RESEARCH PAPERS
Trend Following, Risk Parity and Momentum in
Commodity Futures –
SSRN
Market Timing with Moving Averages – SSRN
Long-Term Return Reversal: Evidence from
International Market Indices – SSRN
Trend Following, Stop Losses, and the Frequency
of Trading – ideas.repec
A multi-agent nonlinear Markov model of the
order book – arXiv
The Low Volatility
Effect: A Comprehensive Look – SSRN
QUANT STUFF
Highlights of R in Finance 2012 – Portfolio
Probe
Who Actually Uses Palantir Finance? – Forbes
Basics of Using Bloomberg – mathfinance.cn
HIGH FREQUENCY TRADING
HFT charts of the day, trading-cost edition – Felix
Salmon / Reuters
Knight Trading Loss Said to Be Linked to
Dormant Software – BB
$440 million trading loss stemmed from old
computer software that was inadvertently reactivated when a new program was
installed, according to two people briefed on the matter.
On Wall Street, the Rising Cost of Faster
Trades – NYT
OTHER
Liquidity and Asset Prices – mathfinance.cn
An excellent review book on liquidity and asset
prices by three experts Yakov Amihud, Haim Mendelson, and Lasse Heje Pedersen.
A good bed reading one. (full pdf)
Here are some compelling articles you may have
missed
Lie Detection for Investment Professionals: A
Summary – CFA
Institute
10 Answers To The Biggest Market Questions – Mortality
Sucks
Treasury Yields Are Soaring – dshort
So what has happened to the well-off in global
society? A quick comparison of the development of incomes in higher income
countries and key emerging markets bears out this story.
Five years on, the Great Recession is turning
into a life sentence
– The
Telegraph
Minding the Chastity Belts: Fiduciary Duties
and 900 Pound Lemmings – The
Psy-Fi Blog
Many advisors will avoid fiduciary
responsibilities because a fiduciary relationship overrides any contract – in
common law, if the fiduciary breaks the terms of the trust the contract is
irrelevant. This is generally covered by
the first duty of the fiduciary, that of loyalty: to act in good faith, and to
avoid conflicts of interests, such as taking commissions on products sold to
clients, even where disclosed.
You Are Now About to Witness the Strength of
Street Knowledge – Reformed
Broker
If you've lost money being long shares of
Groupon ($GRPN) this year, it's probably for one of the following three reasons
Risky Shifts – The Psy-Fi Blog
“The analyses show that when the subjects
reached decisions as members of a group they tended to advocate significantly
more risky courses of action than they had chosen when they reached decisions
as individuals”.
How Change Happens – John Mauldin /
The Big Picture
On
complexity, why disasters happen and where do the fat tails come from.
Charting The Lost Generation Of Investors – ZH
Should Trading Be Fun And What Is A
“Skinny-Red”? – bclund
The Time Has Come for Options Dark Pools – Advanced
Trading
A lot of the value in options dark pools would
look surprisingly similar to those found in equity dark pools.