‘Dequantification’ Algorithmic Trading Articles & Financial Insight
- The Underlying Dog and the Option Tail. Which Wags Which?
SUBSCRIBERS ONLYThe direction of information flows in markets has long been the subject of academic debate. Automated Trader talks to Dr. Tyler Brough of Utah State University about recent papers he has co-published with colleague Dr. Ben Blau on this subject in the context of options, their underlying securities and market friction.
- The Science of Defundamentalisation
SUBSCRIBERS ONLYShort-term return reversal is a long-established phenomenon in financial markets. Yet despite this longevity, the challenge of isolating fundamental return drivers from their non-fundamental counterparts in a reversal model still persists. Automated Trader talks to Zhi Da, Associate Professor of Finance at the University of Notre Dame and author of a recent paper on the subject, about a novel approach to this conundrum.
- The volume and behaviour of crowds
SUBSCRIBERS ONLYVolume is a comparatively neglected variable in academic finance - price and return usually attract far more research interest. An interesting recent exception to this rule, which examines the interaction of volume with behavioural finance, is "Market crowd trading conditioning, agreement price, and volume implications" by a group of Chinese researchers. Automated Trader discusses the paper with its lead author, Leilei Shi of the University of Science and Technology of China.
- A New Look at Momentum
SUBSCRIBERS ONLYTime series momentum strategies are about as old and ubiquitous as the CTA community that uses them, yet there has been surprisingly little recent academic work done in this space. Notable exceptions to this are two papers produced in 2012 and 2013 by Dr. Nick Baltas and Prof. Robert Kosowski of Imperial College London. Automated Trader talks to the authors about their work and some of the conclusions, which run counter to established thinking.
- Dequantification: Optimal Balance Pairs
SUBSCRIBERS ONLYA common problem encountered by Automated Trader readers who use strategies such as pairs trading is determining the optimal ratio of securities to buy/sell when executing a trade. Automated Trader talks to Agnes Tourin of the Department of Finance and Risk Engineering at the Polytechnic Institute of NYU about how the stochastic control approach proposed in a recent paper1 she co-authored may offer a possible solution.