For trading, policy decisions, the pandemic, and scientists' conclusions (which should almost always be tentative), there is a wide range of reasonable views.

That range reflects the many things we don't know with respect to both theory and application.
Acknowledging the (A) broad range of reasonable views is very different from (B) picking one of those views, anchoring on it, and saying that everyone else is wrong.

(B) is basically American politics. If you try to pick (A), a (B) will try to re-frame you as an enemy (B).

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More from @ReformedTrader

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

Leveraged Loans: Is High Leverage Risk Priced in?
papers.ssrn.com/sol3/papers.cf…

Quantile Risk Premiums
papers.ssrn.com/sol3/papers.cf…

November 2020 edition
Investing in the year of Corona: The Modified Risk Parity Portfolios
papers.ssrn.com/sol3/papers.cf…

COVID-19 and Development: Lessons from Historical Pandemics
papers.ssrn.com/sol3/papers.cf…

Decoding the Pricing of Uncertainty Shocks
papers.ssrn.com/sol3/papers.cf…
Extreme Price Co-Movement of Commodity Futures and Industrial Production Growth: An Empirical Evaluation
papers.ssrn.com/sol3/papers.cf…

Smart Retail Traders, Short Sellers, and Stock Returns
papers.ssrn.com/sol3/papers.cf…
Read 11 tweets
1 Dec
1/ Asset Allocation Via Clustering: How Useful Is My Stylebox? Are Most Hedge Funds the Same? (Stock)

"We apply clustering algorithms to asset classes and HF strategies (1990-2020) to investigate cluster stability and compute the returns of risk parity."

papers.ssrn.com/sol3/papers.cf…
2/ "What can machine learning clustering algorithms tell us about which asset classes tend to move together and which have historically stayed further apart? Which hedge fund strategies provide the best diversification in portfolios?"
3/ "We find very little benefit to traditional “style box” diversification over our rolling 3-year periods. While they could make sense to access better alpha, tactical factor exposure, or portfolio beta management, they exhibited only rare opportunities for diversification.
Read 11 tweets
27 Nov
1/ Why Do Price and Volatility Information from the Options Market Predict Stock Returns? (Muravyev, Pearson, Pollet)

"Findings suggest that the IV spread [ATM puts & calls] and skew predict returns because they proxy for expected stock borrowing costs."

papers.ssrn.com/sol3/papers.cf…
2/ "The implied volatility spread is the average difference of the implied volatilities of the available calls and puts with the same strike price and expiration date.

"The IV skew is the difference between the IVs of an out-of-the-money put and an at-the-money call."
3/ "The high correlations between option-implied and
indicative fees suggest that the option-implied borrowing fees can be useful proxies for the actual stock borrowing fees faced by a marginal investor."
Read 16 tweets
26 Nov
1/ Momentum, Reversal, and Seasonality in Option Returns (Jones, Khorram, Mo)

"Option returns in individual stocks have momentum, short-term reversal, and quarterly and annual seasonality. This remains strong after controlling for other characteristics."

papers.ssrn.com/sol3/Papers.cf…
2/ Zero-delta one-month near-the-money straddles in individual stocks are formed each month and held to expiration.

Returns are excess returns calculated based on bid-ask midpoints.

IV-HV uses one-year HV
IV term stpread is calculated between 60-day and 30-day options
3/ "Straddle returns in the previous month are likely to be reversed in the following one.

"At lags 3+, there is momentum. The slope coefficients on lags 3 through 12 are all positive and all statistically significant.

"There is a complete lack of long-term reversal."
Read 20 tweets
26 Nov
1/ Structure of Scientific Revolutions (Thomas Kuhn)

"A new theory is not chosen because it is true but because of a worldview change. Progress is not a simple line leading to the truth. It is progress away from less adequate conceptions of the world."

amazon.com/Structure-Scie… Image
2/ This book changed the way the history of science is studied.

It's part of the list "The 100 Most Influential Books Ever Written:"
en.wikipedia.org/wiki/The_100_M…

For related reading, check out the syllabus for Michael Friedman's Stanford course:
web.stanford.edu/class/phil61/
3/ Introductory Essay (Ian Hacking)

"That is the structure of scientific revolutions: normal science with a paradigm and a dedication to solving puzzles; followed by serious anomalies, which lead to a crisis; and finally resolution of the crisis by a new paradigm.
Read 141 tweets
25 Nov
Nice machine on sale at Costco:

costco.com/.product.10057… Image
The Kindle Paperwhite is now on sale for $84.99 (at a 35% discount from the list price):

amazon.com/All-new-Kindle… Image
The Digiland 10.1" tablet (Android, 2 GB RAM, 32 GB SSD) is now on sale at Best Buy for $59.99 (at a 40% discount from the list price):

bestbuy.com/site/digiland-… Image
Read 4 tweets

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