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Saturday, November 3

3rd Nov - Weekender: Markets & Trading

Previously on MoreLiver’s:

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Earnings Beat Rate Gets BetterBespoke

Companies Averaging Gains on Report DaysBespoke

High number of S&P 500 companies issued EPS guidance in October during Q3 earnings seasonFactset
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 bearishSober Look

U.S. Equity Sector ETF PerformanceGlobal Macro Monitor

Catching a Falling KnifeMebane Faber
Sector performance after drawdown periods.

The Halloween Indicator: A Stock Market Anomaly That Is Stronger Than EverCFA 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 weaknessSober Look

Morningstar AdvisorMorningstar
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" ProcessMinyanville
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 StressNature
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 ExecutionCFA 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 IneptitudeThe 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 ProductsMarc to Market

New Factor-Based Strategies Make ETFs Less PassiveInstitutional Investor
Exchange-traded funds increasingly seek to rebalance their portfolios without bastardizing the concept of passive investing.

Traders Copy Academics Who Copy TradersDealbreaker
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 attentionThe Big Picture

Bogle on Active ManagementThe 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 PerformanceCSSA
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 TradingMagic, 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 FizzleCNBC

How Not To Run A Hedge Fund: Geoff Grant EditionForbes

A Few Notes on The Art and Science of Technical AnalysisCXO

(videos) New York conference: Buttonwood gatheringButtonwood / The Economist
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 bitsThe 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

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