Revisiting The January Effect

Photo by the author Introduction In this article, we review the infamous January effect which proposes that stocks' prices increase from December to January is the highest. We illustrate the causes of the January effect, and present a simple trading strategy to profit from this calendar effect. The project is shared on my online repository … Continue reading Revisiting The January Effect

Principal Component Analysis As A Factor Model

Photo by the author Introduction Principal component analysis (PCA) is a statistical technique which enjoys applications in image processing and quantitative finance. In this article, we focus on the later application in quantitative trading, in particular using PCA as a multi-factor model of portfolio returns. We use the multi-factor model to design a momentum trading … Continue reading Principal Component Analysis As A Factor Model

How To Pick A Good Cointegrating Pair

A time series is considered stationary if its probability distribution does not change over time. If the price series of a security is stationary, then it would be a suitable candidate for a mean-reversion trading strategy. However, most security price series are not stationary: they seem to follow a lognormal random walk; and drift farther and farther away from the initial value.

Investing On ETFs Using The Kelly Formula Part 2

The main problem of an investor is identifying profitable trading strategies. To solve this, he uses fundamental and quantitative techniques to pick winning trading systems. The next problem concerning the investor is how to optimally allocate his capital to different winning strategies. A solution is to use the Kelly formula to calculate the amount of capital he will deploy to securities or trading systems before him.

Investing On ETFs Using The Kelly Formula Part 1

The main problem of an investor is identifying profitable trading strategies. To solve this, he uses fundamental and quantitative techniques to pick winning trading systems. The next problem concerning the investor is how to optimally allocate his capital to different winning strategies. A solution is to use the Kelly formula to calculate the amount of capital he will deploy to securities or trading systems before him.

Pair-trading With Cryptocurrencies Part 2

Cryptocurrencies (or cryptos) captured the world's imagination during the last couple of years. From their spectacular rise in 2017, to their equally hard fall in 2018, and to their most recent revival this year. Cryptocurrencies and the blockchain technology powering them are regarded as disruptive forces, proposing an alternative decentralized monetary system. They have also gathered their fair share of criticism. Cryptocurrencies are accused of facilitating transfer of "dirty money" between criminals. They provided mind-boggling returns a couple years back and earned the reputation of being a "get rich quick" scheme.

Pair-trading With Cryptocurrencies Part 1

Cryptocurrencies (or cryptos) captured the world's imagination during the last couple of years. From their spectacular rise in 2017, to their equally hard fall in 2018, and to their most recent revival this year. Cryptocurrencies and the blockchain technology powering them are regarded as disruptive forces, proposing an alternative decentralized monetary system. They have also gathered their fair share of criticism. Cryptocurrencies are accused of facilitating transfer of "dirty money" between criminals. They provided mind-boggling returns a couple years back and earned the reputation of being a "get rich quick" scheme.

Backtesting A Trading Strategy Part 3

Backtesting is a tool to measure the performance of a trading strategy using historical data. The backtesting process consists of three parts: 1. determining the universe of securities where we will invest in (e.g. equity or fixed income? US or emerging markets?); 2. gathering historical data for the universe of securities; and 3. implementing a trading strategy using the historical data collected.

Backtesting A Trading Strategy Part 2

Backtesting is a tool to measure the performance of a trading strategy using historical data. The backtesting process consists of three parts: 1. determining the universe of securities where we will invest in (e.g. equity or fixed income? US or emerging markets?); 2. gathering historical data for the universe of securities; and 3. implementing a trading strategy using the historical data collected.

Backtesting A Trading Strategy Part 1

Backtesting is a tool to measure the performance of a trading strategy using historical data. The backtesting process consists of three parts: 1. determining the universe of securities where we will invest in (e.g. equity or fixed income? US or emerging markets?); 2. gathering historical data for the universe of securities; and 3. implementing a trading strategy using the historical data collected.