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Darren
@ReformedTrader
, 4 tweets, 4 min read Read on Twitter
1/ Negative alphas for option-writing funds since inception: PUTW, PBP, HSPX (statistically significant for PUTW and HSPX but not for PBP):

portfoliovisualizer.com/factor-analysi…
2/ Similar story for RPUT (not statistically significant):

portfoliovisualizer.com/factor-analysi…

and QYLD (not statistically significant):

portfoliovisualizer.com/factor-analysi…

and KNG (not statistically significant):

portfoliovisualizer.com/factor-analysi…
3/ Also the case for GLDI (not statistically significant):

portfoliovisualizer.com/factor-analysi…

and SLVO (not statistically significant):

portfoliovisualizer.com/factor-analysi…

USOI has a slight positive alpha (not statistically significant):

portfoliovisualizer.com/factor-analysi…
4/ 2017 was a mixed bag (none of the alphas are statistically significant, though):

portfoliovisualizer.com/factor-analysi…
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Darren
@ReformedTrader
1/ Adaptive Asset Allocation: A Primer (Butler, Philbrick, Gordillo, Varadi)

"Estimates of parameters for portfolio optimization based on long-term observed average values are inferior to estimates based on observations over much shorter time frames."

papers.ssrn.com/sol3/papers.cf…
2/ This very readable article walks through the reasons why the inputs usually used for portfolio optimization are not reliable enough, especially for the 3-5 year emotional horizons most investors have.
3/ Returns, volatilities, and correlations can deviate from their historical averages by large amounts.

More recent observations tend to be better predictors; this is why momentum and volatility targeting have historically worked. The choice of lookback window matters.
Read 7 tweets
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Darren
@ReformedTrader
1/ Factor Momentum Everywhere (Gupta, Kelly)

"Time series factor momentum benefits investment strategies that employ traditional momentum, value, and other factors. The momentum phenomenon is driven in large part by persistence in common return factors."

papers.ssrn.com/sol3/papers.cf…
2/ AQR starts with a 65 factors defined in a similar fashion as HML. (This paper doesn't present results for a universe containing mid and large caps only, though it will later show the results with hypothetical transaction costs included.)
3/ The authors then show that factors' past returns have tended to predict future returns.

Returns for factors are even "stickier" than returns of the market itself, so if trend following works on stock indices, it should theoretically work for factors as well.
Read 15 tweets
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Darren
@ReformedTrader
Quant Links:

Value, Long-Term Reversal, Quality, and Low Vol
twitter.com/i/moments/1075…

Trend Following, Momentum, and Carry
twitter.com/i/moments/1075…

Volatility Risk Premium
twitter.com/i/moments/1075…

Calendar and Diagonal Spreads
twitter.com/i/moments/1075…
Seasonality, Sentiment, Macro, ST Mean Reversion
twitter.com/i/moments/1075…

Tax Alpha
twitter.com/i/moments/1075…

Benchmarks
twitter.com/i/moments/1075…

Real Estate, Commodities, and Bonds
twitter.com/i/moments/1075…

Craftsmanship Alpha
twitter.com/i/moments/1075…
Market Psychology and Bubbles
twitter.com/i/moments/1075…

Jobs and Internship Opportunities
twitter.com/i/moments/1098…
Read 4 tweets

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