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Darren 🦃

4 Nov, 11 tweets, 6 min read

https://twitter.com/ReformedTrader/status/1312081223687131137

New SSRN papers, November 2020
(I haven't read these yet, but they have abstracts that look interesting.)

Interconnected Deviations from Covered Interest Parity
papers.ssrn.com/sol3/papers.cf…

October 2020 edition

https://twitter.com/ReformedTrader/status/1312081223687131137

Does Bid-Ask Spread Affect Trading in Exchange Operated Dark Pool? – Evidence From a Natural Experiment
papers.ssrn.com/sol3/papers.cf…

Managing Earnings to Appear Truthful: The Effect of Public Scrutiny on Exactly Meeting a Threshold
papers.ssrn.com/sol3/papers.cf…

Dividend Policy and the COVID-19 Crisis
papers.ssrn.com/sol3/papers.cf…

Short-Selling Bans and Bank Stability
papers.ssrn.com/sol3/papers.cf…

Srisk: A Conditional Capital Shortfall Measure of Systemic Risk
papers.ssrn.com/sol3/papers.cf…

Two Big Distortions: Bank Incentives for Debt Financing
papers.ssrn.com/sol3/papers.cf…

Mutual Fund Competition and Fund Manager Strategy Choice
papers.ssrn.com/sol3/papers.cf…

When is the Price of Dispersion Risk Positive
papers.ssrn.com/sol3/papers.cf…

Information Discreteness and the Lead-lag Returns Puzzle
papers.ssrn.com/sol3/papers.cf…

Variance Risk Premium and Capital Structure
papers.ssrn.com/sol3/papers.cf…

Insurers as Asset Managers and Systemic Risk
papers.ssrn.com/sol3/papers.cf…

Catering to Investors Through Product Complexity
papers.ssrn.com/sol3/papers.cf…

Gap-Filling Government Debt Maturity Choice
papers.ssrn.com/sol3/papers.cf…

ETF Arbitrage Under Liquidity Mismatch
papers.ssrn.com/sol3/papers.cf…

Liquidity Transformation in Asset Management: Evidence from the Cash Holdings of Mutual Funds
papers.ssrn.com/sol3/papers.cf…

Macroeconomic Effects of Secondary Market Trading
papers.ssrn.com/sol3/papers.cf…

Credit Conditions, Macroprudential Policy and House Prices
papers.ssrn.com/sol3/papers.cf…

Banking Integration and House Price Comovement
papers.ssrn.com/sol3/papers.cf…

Shedding Light on Dark Markets: First Insights from the New Eu-Wide OTC Derivatives Dataset
papers.ssrn.com/sol3/papers.cf…

Discriminatory Pricing of Over-the-Counter Derivatives
papers.ssrn.com/sol3/papers.cf…

Dissecting Short-Sale Performance: Evidence from Large Position Disclosures
papers.ssrn.com/sol3/papers.cf…

Do T-Stat Hurdles Need to Be Raised?
papers.ssrn.com/sol3/papers.cf…

Anomalies and False Rejections
papers.ssrn.com/sol3/papers.cf…

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More from @ReformedTrader

Darren 🦃

@ReformedTrader

4 Nov

1/ Unknown Market Wizards (Jack Schwager)

"There are solo traders, operating in complete obscurity, who achieve performance far surpassing the vast majority of professional managers’.

"Some of them may have the best records I have ever encountered."

amazon.com/Market-Wizards…

2/ Peter Brandt

"My brother bought silver coins at a premium of 20% over face value. It was an asymmetric risk trade: you could lose a maximum of 20%, but the upside was unlimited.

"By 1974, silver had more than tripled. My brother was driving around in a Mercedes-Benz." (p. 7)

3/ "Charts have become much less reliable. In the 1970s-80s, patterns were neat. There were fewer whipsaws. There weren’t a lot of people looking at charts.

"I think high-frequency trading creates volatility around breakout points. Markets are more mature, with bigger players.

Read 36 tweets

Darren 🦃

@ReformedTrader

3 Nov

1/ To Trade or Not to Trade? Informed Trading With Short-Term Signals for Long-Term Investors (Israelov, Katz)

"Strategic trade modification [timing] provides exposure to short-term signals without imposing additional transaction costs/capacity limits."

aqr.com/Insights/Resea…

2/ Assets: Equity indices
Long-term signals: value + momentum
Short-term signal: one-week ST reversal

The "mixed portfolio" weights LT and ST signals for max Sharpe net of trading costs (ex post).

"Informed trading" follows through with a trade only if LT and ST signals agree.

3/ "Trading aggressiveness is the % difference between the current position and the desired position that is actually traded.

"Rebalancing daily is approximately 5x more aggressive than rebalancing weekly.

"Informed trading increases gross performance & reduces trading costs."

Read 10 tweets

Darren 🦃

@ReformedTrader

2 Nov

1/ I've been getting e-mails "encouraging" me to vote one way or the other... this is how I've responded:

There is a lot of research over the past sixty years suggesting that people think prediction is much easier than it actually is (for both sides of the political spectrum).

2/ We anchor on pieces of information that are easy to remember because we've seen them in the news, but those are not a randomly chosen sample (so unsuitable for making predictions). They are also such a small sample that it's hard to draw statistically significant conclusions.

3/ "The problem is that it *feels* like a random sample and *feels* like a large enough sample, so the more information that people receive, the more overconfident they become, and (ironically) the worse their predictions get.

Read 12 tweets

Darren 🦃

@ReformedTrader

29 Oct

1/ Short-Term Momentum (Almost) Everywhere (Zaremba, Karathanasopoulos, Long)

"Contrary to stock-level evidence, we find a short-term momentum pattern in five major asset classes: the most recent month’s return positively predicts future performance."

papers.ssrn.com/sol3/papers.cf…

2/ Asset classes: Equities, bonds, bills, commodities, and currencies
Sample period: 1800-2018
Data converted to U.S. dollars
For commodities, *spot* prices are used

"The aggregate number of assets increases gradually from 16 in January 1800 to more than 250 in the final years."

3/ Short-term momentum (SMOM) = asset return in month t-1

For control variables: "Due to our data limitations, we must be able to derive the variables using only price information, i.e., without any additional use of accounting data, investor positions, credit ratings, etc."

Read 15 tweets

Darren 🦃

@ReformedTrader

26 Oct

1/ More Money Than God: Hedge Funds and the Making of a New Elite (Sebastian Mallaby)

"Hedging and leverage could be applied to bonds, futures, swaps, and options. Jones had invented a platform for strategies more complex than he could dream of." (p. 9)

amazon.com/More-Money-Tha…

2/ "Hedge funds are the vehicles for loners and contrarians, for individualists whose ambitions are too big to fit into established financial institutions.

"Cliff Asness had been a rising star at Goldman Sachs but opted for the freedom and rewards of running his own shop.

3/ "Jim Simons, who emerged in the 2000s as the highest earner in the industry, would not have lasted at a mainstream bank: He took orders from nobody, seldom wore socks, and got fired from the Pentagon’s code-cracking center after denouncing his bosses’ Vietnam policy.

Read 195 tweets