Previously
on MoreLiver’s:
31.8. US Close: Bernanke's Apology (comments on Fed)
31.8. Best of August most read pieces + all my ’views’
PORTFOLIO
Tomatoes And The Low-Vol Effect – IndexUniverse
For the investor more concerned about tracking
error and measurement against a benchmark and his peers, a relative risk
approach is more relevant. For the investor who desires avoiding sharp
downdrafts but does not mind tracking error deviation, an absolute risk
approach based on improved Sharpe ratios may be more appropriate. In either
case, both relative and absolute risk investors can improve the structure of
their equity portfolios by migrating away from the conventional equity
allocation.
MPT Implodes: Mean Variance Optimization Bites
the Dust – Systematic
Relative Strength
If we remove the academic flourishes, what he
is saying is that mean variance optimization is dreadful and is easily
outperformed by simply equal-weighting the asset classes.
The Efficiency of Mean-Variance Optimization
with In-Depth Covariance Matrix Estimation and Portfolio Rebalancing – SSRN
The results indicate that it is possible to
achieve notably higher Sharpe ratios with portfolio optimization than by using
a naïve equal-weight strategy.
Comparing First, Second and Third Generation
Commodity Indices –
SSRN
Long-only second generation indices, which
attempt to minimize the harmful impact of contango on performance and use
active long-only signals based on momentum or roll-yields, are found to
outperform their first generation counterparts. Third generation indices fare
even better as they accurately buy backwardated assets and short contangoed
ones, thereby reducing overall volatility. We see these indices as serious
contenders to commodity trading advisors that merely replicate strategies based
on momentum or term structure.
Study Finds Many ETF Indexes Misleading – Institutional
Investor
The Financial Industry Regulatory Authority
bars most fund owners from using back-tested data to promote their products.
But index providers are not subject to that restriction. As a result, many of
today’s indexes are constructed by index providers based on studies by sponsors
of ETFs that will be linked to them. The sponsors then license the indexes from
the providers.
Estimating The Optimal Rebalancing Rules – The
Capital Spectator
In order to harvest the associated risk
premium, you’ll have to deal with two big challenges. One is
behavioral—rebalancing works best in a contrarian context, i.e., buy low, sell
high. The other hurdle is technical—deciding when to rebalance, and by how much.
Presentation on Quantitative Value Investing – Greenbackd
video +
white paper links
Macro Trading Models Using Economic Statistics (July 2011) – History
Squared
Research Review: Risk Parity Investing
Strategies – The
Capital Spectator
Fact File: S&P 500 Sigma Events – CFA
Institute
TRADING
The perils of do-it-yourself investing – MarketWatch
Can workers fight the weak economy by becoming
full-time investors?
Why Investing is the World’s Most Difficult
Profession – John
Standerfer
Outside of professional sports, I’m not sure
there is any other industry that generates such objective and continuous
measurements.
Day Trading Is a Sucker’s Game – Crossing
Wall Street
The cult of the financial analyst was laid in
its tomb ten years ago. Now the much-vaunted figure of the day trader is headed
for the same scrap heap.
Some hard questions. – Adam Grimes
5 Reasons You Deserve To Lose Every Penny In
The Market – bclund
Reckoning with Risk (1) – Above
The Market
Reckoning with Risk (2) – Above
The Market
Because all investment is burdened with it,
investors must all and always reckon with risk, its implications and its
consequences. However, risk is an
elusive concept. Risk is anything but
tame, benign, entirely predictable or fully controllable. It takes on different guises in different
situations or contexts and is not susceptible to precise definition.
A Market Wizards Dozen: Key Lessons For All
Traders – Jack
Schwager / Traderplanet
A little mental trick… – Adam
Grimes
anytime to you put a trade on, assume that the
trade is going to be a loser.
John Bogle’s 10 Rules of Investing – PragCap
Investment Advice from Mars – Rick
Ferri
Philosophy, strategy, discipline
HEDGE FUNDS
Why the Investment Case for Hedge Funds is
Still Sound – PragCap
Alexander
Ineichen’s 30-minute video (I’ve read one book by him, it’s ok!), or
alternatively the direct link to Youtube.
Looking at the Ins and Outs of Volatility
Trading – Advanced Trading
In a video interview with Opalesque TV, Maple
Leaf trader Michael Wexler breaks down the ins and outs of volatility trading.
Inside Abel Noser's Trading Floor – Advanced
Trading
Advanced Trading takes you on an exclusive tour
of Abel Noser's New York trading floor, where the agency broker known for transaction cost
analysis, is customizing algorithms for the buy side, while growing its fixed
income trading and transitions business.
Study Confirms Hedge Funds Taking Over Bond
Trading from Banks
– Institutional
Investor
A newly released study by Greenwich Associates of Stamford, Connecticut, confirms anecdotal
reports that hedge funds are filling the gap left by banks that regulators have
forced out of proprietary trading.
Hedgies Fade The Rally As 'Flows' Dominate
Positioning – ZH
Only 17% of credit managers (real or leveraged)
expect notable widening in spreads (a rise in risk) by year-end, according to
Citigroup's most recent client survey.
HIGH FREQUENCY
High-Frequency Traders Flat-Out Buying Data
Ahead of You – MarketBeat
/ WSJ
The ISM is just one of the private data
providers that are increasingly splitting their dissemination policies. Some
are sticking to the letter of the law, releasing their information to all
comers at the same time, but also providing special opportunities for
high-speed traders willing to pay for super-fast feeds.
A Father Of High-Speed Trading Thinks We
Should Slow Down – NPR
Asset Managers Seek Ways to Avoid Another
“Knightmare” – Institutional
Investor
Spurred by the growing complexity of global
equity markets, buy-side investors are finding smarter ways to access liquidity
and protect their anonymity in the markets. They’re getting help from some
unlikely service providers, including high frequency trading firms and hedge
funds.
People as Market Makers Were Never Crash
Insurance Either – All
About Alpha
“What we need,” Angel said, “is a fail-safe or
fail-graceful system, one that recognizes that glitches will happen and that
can contain the damage they can do through appropriate circuit breakers and
shock absorbers.”
OTHER
The Luck of the Average – Minyanville
One of the most common risk errors is to do a
computation assuming average values for uncertain inputs and treat the result
as the average outcome.
Machine Learning Throwdown – BigML
New $30,000 Contest – mebanefaber.com
Write a
paper, win money.
Nouriel’s 26 Early Warnings and Predictions – EconoMonitor
Roubini’s 2008 advisory, ‘The Rising Risk of a
Systemic Financial Meltdown: Twelve Steps to Financial Disaster,’ reads as
quite prescient, looking to the season of fraught policy meetings for central
banks and governments that lies ahead. In fact, Nouriel’s outline of a slow
collapse at a time when people were hoping for a quick recovery still seems
bold in retrospect. Altogether I count 26 predictions in the article, and I
would say all 26 came to pass…
Cloud-Based Financial Advisers – Turnkey
Analyst
Book Bits – The
Capital Spectator
Book Review: A Decade of Debt – The Aleph
Blog