Previously on MoreLiver’s:
Companies Averaging Gains on Report Days – Bespoke
High number of
S&P 500 companies issued EPS guidance in October during Q3 earnings season – Factset
October was an active month for guidance from S&P
500 companies, as 60 companies issued quarterly EPS guidance for Q4 2012 and
126 companies issued annual EPS guidance for the current fiscal year during the
month.
After the AAPL announcement, earnings expectations for
S&P500 take a sharp turn for the worse; Barclays remains bearish – Sober
Look
Catching a Falling
Knife – Mebane
Faber
Sector performance after drawdown periods.
The Halloween
Indicator: A Stock Market Anomaly That Is Stronger Than Ever – CFA
Institute
EM bonds: time to
sell? – beyondbrics
/ FT
Barely have they found somewhere to put their money
when the cry of “bubble” goes up. But with the hot inflows into emerging
markets bonds driving yields to a record low and valuation models getting
thrown out of whack, that’s exactly what some EM specialists are suggesting.
Weak fundamentals and
negative sentiment contribute to yen weakness – Sober
Look
TRADING / QUANT
Morningstar Advisor – Morningstar
Factor analysis, machine trading, most excellent
magazine issue
Passive Asset
Allocation Vs. The World – The
Capital Spectator
What can you expect from a passive asset allocation
strategy that owns all the major asset classes? More than you might think.
Owning everything has a tendency to deliver average-to-above-average returns
relative to a broad set of actively managed asset strategies across the risk
spectrum. Surprised? You shouldn't be.
Rational Bubbles,
Part 2: Why Investors Should Understand What's Known in Statistics as the
"Exploding" Process – Minyanville
Aaron Brown: Originally studied to model physical
events like the collapse of structures, the "exploding" process can
be used to explain price trajectories for certain securities.
Quantifying the Behavior of Stock Correlations
Under Market Stress
– Nature
We find the
striking result that the average correlation among these stocks scales linearly
with market stress reflected by normalized DJIA index returns on various time
scales. Consequently, the diversification effect which should protect a
portfolio melts away in times of market losses, just when it would most
urgently be needed. Our empirical analysis is consistent with the interesting
possibility that one could anticipate diversification breakdowns, guiding the
design of protected portfolios.
(video) Challenges
in Portfolio Management: Fat Tails, Downside Risk, ERP, and Trade Execution
– CFA
Institute
Peng Chen, CEO
Asia (ex-Japan) at Dimensional Fund Advisors: Tools such as conditional
value-at-risk and truncated Lévy flight that deal with skewness, kurtosis, and
fat tails are discussed, along with the importance of focusing on capturing
broad market or beta returns in the long term and avoiding the temptation of
mainly pursuing alpha.
On the Invariant Nature of Investor Ineptitude – The
Psy-Fi Blog
It doesn’t much
matter whether we’re in 1st century Rome, 17th century Holland, 18th century
Britain or 21st century America, if you put large groups of people in the same
situation they’ll tend to behave the same way when they have money at stake:
irrationally.
Great Graphic:
Exchange Traded Fixed Income Products – Marc
to Market
New Factor-Based
Strategies Make ETFs Less Passive – Institutional
Investor
Exchange-traded funds increasingly seek to rebalance
their portfolios without bastardizing the concept of passive investing.
Traders Copy Academics Who Copy Traders – Dealbreaker
Everyone
worries about hedge funds all doing the same trades and being correlated with
each other and this paper is sort of loose evidence of that: there are
anomalies in market efficiency, and they are not “publicly known” to the
academic literature, but they are correlated with each other, perhaps
suggesting that enough people know about them to all be trading them together.
Investment banking: Game over – The
Economist
UBS swings the axe
Q&A: The price of paying attention – The Big
Picture
Bogle on Active Management – The Big
Picture
Founder and
Former Chief Executive of the Vanguard Group and President of the Bogle
Financial Markets Research Center Before the United States Senate Governmental
Affairs Subcommittee on Financial Management, the Budget, and International
Security 3-Nov-2012
Permanent Portfolio Derivation and Historical
Performance – CSSA
This
graphic is designed to help readers understand the logic and assumptions
embedded in the Permanent Portfolio model by Harry Browne. It is also a useful
framework for understanding how to construct
regime-based portfolios.
The Problem with the Foresight Report on
Computer Trading – Magic,
Maths and Money
It turns
out that Paul Wilmott shares my views on the BIS Foresight Future of Computer Trading in the Financial Markets. I have made the point that the Report is
running the risk of appearing as what Roger Pielke Jr describes as
"stealth advocacy", scientific research presenting itself as neutral
technical analysis while it is in fact advocating a specific course of action.
The Value of External Managers – The
View from the Blue Ridge
More Hedge Funds
Close Up Shop as Returns Fizzle – CNBC
How Not To Run A
Hedge Fund: Geoff Grant Edition – Forbes
A Few Notes on The Art and Science of Technical
Analysis – CXO
OTHER
American fiscal cliff was one of the main subjects…But
the conversation also roamed far and wide, with Larry Summers debating the euro
zone crisis, Mohamed El-Erian giving the Bagehot lecture on the bond markets,
Sam Palmisano of IBM on corporate
governance and Vincent Reinhart on deleveraging.
Book bits – The
Capital Spectator
Gadgets add
complexity to brutal bank layoffs – Reuters
In the high-tech, gadget-addicted world of investment
banking, layoffs are becoming more complex and brutal as firms try to stop
sensitive data leaving with employees.
Excellent & quick collections of thoughts, ideas and
links:
Daily Brief – HistorySquared
Economic Freedom and Growth; U.S. Debt; Brazil’s
Economy; China – Japan
Schism
Daily Brief – HistorySquared
Current Account Reversals and Crises; Currencies amid
Empire Declines; China Private
Debt Growth
Daily Brief – HistorySquared
Malcom X on Land and Revolutions; China’s
Historical Behavior in Land Disputes; Elon Musk On Aerospace;
Daily Brief – HistorySquared
Inflation as the Path of Least Resistance; World
Banking Assets; Territorial Disputes -
Daily Brief – HistorySquared
Most Common Reason for War; Accounting Shenanigans and
Hidden Risks in Chinese Banks