The purpose of this paper is to present a simple quantitative method that improves the risk-adjusted returns across various asset classes. A simple moving average timing model is tested since 1900 on the United States equity market before testing…
Quantitative Methods
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In this paper, a systematic and automatic approach to technical pattern recognition is proposed using nonparametric kernel regression, and this method is applied to a large number of US stocks from 1962 to 1996 to evaluate the effectiveness of…
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This paper presents a critique of expected utility theory as a descriptive model of decision making under risk, and develops an alternative model, called prospect theory. Choices among risky prospects exhibit several pervasive effects that are…
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In this paper we examine global tactical asset allocation (GTAA) strategies across a broad range of asset classes. Contrary to market timing for single asset classes and tactical allocation across similar assets, this topic has received little…
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We propose a new test for superior predictive ability. The new test compares favorably to the reality check (RC) for data snooping, because it is more powerful and less sensitive to poor and irrelevant alternatives. The improvements are achieved by…
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We present the first large-scale empirical application of reinforcement learning to the important problem of optimized trade execution in modern financial markets. Our experiments are based on 1.5 years of millisecond time-scale limit order data…
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Behavioral economics tells us that emotions can profoundly affect individual behavior and decision-making. Does this also apply to societies at large, i.e., can societies experience mood states that affect their collective decision making? By…
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Value and momentum ubiquitously generate abnormal returns for individual stocks within several countries, across country equity indices, government bonds, currencies, and commodities. We study jointly the global returns to value and momentum and…
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Two easily measured variables, size and book-to-market equity, combine to capture the cross-sectional variation in average stock returns associated with market β, size, leverage, book-to-market equity, and earnings-price ratios. Moreover, when the…
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The Hurst exponent (H) is a statistical measure used to classify time series. H=0.5 indicates a random series while H>0.5 indicates a trend reinforcing series. The larger the H value is, the stronger trend. In this paper we investigate the use of…
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For U.S. stock prices, evidence of mean reversion over long horizons is mixed, possibly due to lack of a reliable long time series. Using additional cross-sectional power gained from national stock index data of 18 countries during the period 1969…
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Evidence of stock-return predictability by financial ratios is still controversial, as documented by inconsistent results for in-sample and out-of-sample regressions and by substantial parameter instability. This article shows that these seemingly…
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The purpose of this paper is to present simple quantitative methods that improve risk-adjusted returns for investing in US equity sectors and global asset class portfolios. A relative strength model is tested on the French-Fama US equity sector data…
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'Pairs Trading' is an investment strategy used by many Hedge Funds. Consider two similar stocks which trade at some spread. If the spread widens short the high stock and buy the low stock. As the spread narrows again to some equilibrium value, a…
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During the week of August 6, 2007, a number of high-profile and highly successful quan- titative long/short equity hedge funds experienced unprecedented losses. Based on empir- ical results from TASS hedge-fund data as well as the simulated…
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A lot, including a few things you may not expect. Previous studies find that the term spread forecasts GDP but these regressions are unconstrained and do not model regressor endogeneity. We build a dynamic model for GDP growth and yields that…
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We propose forecasting separately the three components of stock market returnsthe dividendprice ratio, earnings growth, and priceearnings ratio growththe sum-of- the-parts (SOP) method. Ourmethod exploits the different time series persistence of the…
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Researcher (at a non-Academic Institution)London, United Kingdom
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Student (Master)Getafe, Spain