Cash–Opportunity Lost or Opportunity Gained

November 7, 2012 | klr

Tom Brakke from wrote a great thought piece Cash as Trash, Cash as King, and Cash as a Weapon for the CFA Institute blog.  My favorite part comes in the last paragraph: “That’s the kind of analysis that should be br...
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Life on the Big International Frontier

October 16, 2012 | klr

Although I have used the Kenneth French data library extensively in various posts, I have not yet used the international data sets paired with the wonderful paper. Eugene F. Fama and Kenneth R. French (2012) "Size, Value, and Momentum in International...
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Emerging as Low Vol

October 2, 2012 | klr

Extending the series begun with When Russell 2000 is Low Vol, I thought I should take a look at Emerging Market stocks during periods of low relative volatility to the S&P 500.  So you can replicate even without access to expensive data, let
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When Russell 2000 is Low Vol

October 1, 2012 | klr

Continuing in my exploration of the Russell 2000 (Russell 2000 Softail Fat Boy), I thought I would try to approach the topic with a low volatility paradox mindset.  Since 2005, beta of the Russell 2000 compared to the S&P 500 has exceeded 1.2 ...
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Statistics of Drawdown–paper and post

June 11, 2012 | klr

Thank so much to Patrick Burns’ post Variability in maximum drawdown.  He starts with “Maximum drawdown is blazingly variable,” which I say is why money management is so blazingly difficult.  After spending a lot of time thinking about ...
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Evaluation of Tactical Approaches

June 8, 2012 | klr

Tactical approaches are often chosen based on the best cumulative return which implicitly incorporates significant hindsight bias.  Just because an approach dominates for a period of time does not indicate that it will be the best approach.  ...
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System from Trend Following Factors

June 1, 2012 | klr

As I thought more about Trend Following Factors from Hsieh and Fung, I thought that the trend following factors might indicate a state/regime for the equity markets that could potentially offer momentum-style timing signals for a system on the S&P ...
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French Global Factors

April 30, 2012 | klr

I have said it already in multiple posts, but Kenneth French’s data library is one of the most generous and powerful contributions to the financial community.  To build on Systematic Investor’s series on factors, I thought I should run some ba...
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Real Time Structural Break

April 27, 2012 | klr

Yesterday as I played with bfast I kept thinking “Yes, but this is all in hindsight.  How can I potentially use this in a system?”  Fortunately, one of the fine authors very generously commented on my post Structural Breaks (Bull or Bear?...
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Structural Breaks (Bull or Bear?)

April 26, 2012 | klr

When I spotted the bfast R package, I could not resist attempting to apply it to identify bull and bear markets.  For all the details that I do not understand, please see the references: Jan Verbesselt, Rob Hyndman, Glenn Newnham, Darius Culvenor...
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Efficient Frontier of Funds and Allocation Systems

April 18, 2012 | klr

I did a very basic experiment in Efficient Frontier of Buy-Hold and Tactical System where I determined the efficient frontier of the S&P 500 with itself transformed by a Mebane Faber 10-month moving average tactical allocation. The result was inter...
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Opinions Not Backed by Money Updated Again

March 15, 2012 | klr

Strange that I am updating this post for a third time and nothing really has changed, but the fact that nothing has changed is incredibly interesting to me.  Since it is an update, I will not duplicate the explanation, so please read the last vers...
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Stocks When Bonds are Extreme

January 12, 2012 | klr

In Extreme Bond Returns, I did not consider the context of extreme bond returns, so let’s examine annual returns for the Dow Jones Industrial Average when bonds experience extreme annual returns.  I was very surprised that stocks performed extre...
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With Size, Does Risk–>Return?

December 15, 2011 | klr

A basic tenet in finance is that higher risk should lead to higher return as the time horizon stretches to infinity.  However, in bonds, higher risk has not meant higher return with either credit risk (high-yield) or long duration risk (maturity &...
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A Tale of Two Frontiers

December 9, 2011 | klr

In a follow up to Evolving Domestic Frontier, I wanted to explore the efficient frontier including international indexes since 1980.  Life is great when your primary indexes (Barclays Aggregate and S&P 500) lie on the frontier as they did 1980...
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Improved Moving Average?

December 4, 2011 | klr

When @quantfblog started following me on Twitter, I was delighted to discover their papers Papailias, Fotis and Thomakos, Dimitrios D., An Improved Moving Average Technical Trading Rule (September 11, 2011). Available at SSRN:
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Magical Russell 2000

November 21, 2011 | klr

I have marveled at the magical Russell 2000 in Crazy RUT, but I am still surprised at its behavior through this selloff.  With a 20-day move of 30% (6% in one hour) and big outperformance to the developed and developing world, the Russell 2000 con...
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Cross Pollination from Systematic Investor

November 20, 2011 | klr

After reading the fine article Style Analysis from Systematic Investor and What we can learn from Bill Miller and the Legg Mason Value Trust from Asymmetric Investment Returns, I thought I should combine the two in R with the FactorAnalytics package.&n...
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