{"id":614,"date":"2015-07-22T20:35:36","date_gmt":"2015-07-22T20:35:36","guid":{"rendered":"http:\/\/quantpedia.com\/?p=614"},"modified":"2019-08-22T05:47:50","modified_gmt":"2019-08-22T05:47:50","slug":"quantpedia-update-22nd-july-2015","status":"publish","type":"post","link":"https:\/\/vvv.quantpedia.com\/es\/quantpedia-update-22nd-july-2015\/","title":{"rendered":"Quantpedia Update – 22nd July 2015"},"content":{"rendered":"

\n\tNew strategies:<\/u><\/strong><\/p>\n

\n\t#271 – Earnings Announcements Combined with Stock Repurchases<\/strong><\/p>\n

\n\tPeriod of rebalancing:<\/strong> daily
\n\tMarkets traded: <\/strong>equities
\n\tInstruments used for trading:<\/strong> stocks
\n\tComplexity:<\/strong> Moderately comples strategy
\n\tBactest period:<\/strong> 1987 – 2013
\n\tIndicative performance:<\/strong> 25.20%
\n\tEstimated volatility:<\/strong> 11.11%
\n\tSource paper:<\/strong><\/p>\n

\n\tAmini, Singal: Are Earnings Predictable?<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2589966<\/a>
\n\tAbstract:
\n\tIf managers use their superior information to time a firm’s corporate actions, it is likely that equity issuance will precede bad earnings while stock repurchase announcements will precede good earnings. Consistent with this conjecture, we find evidence of market timing and earnings predictability. The market reaction to earnings following repurchase announcements is statistically and economically significantly higher by 4.56% than earnings following SEO pricings over a 25 trading day window (-10, 15).<\/p>\n

\n\tNew research papers related to existing strategies:<\/strong><\/u><\/p>\n

\n\t#23 – Momentum Effect Combined with Term Structure in Commodities<\/strong><\/p>\n

\n\tRad: Double-Sort Trading Strategy on Commodity Futures: Performance Evaluation and Stop-Loss Implementation<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2614241<\/a>
\n\tAbstract:
\n\tThis master thesis, first, re\u00e2\u20ac\u0090examines the performance of the double\u00e2\u20ac\u0090sort trading strategy on commodity futures using the data from January 1979 to October 2011. The double\u00e2\u20ac\u0090sort strategy is an active strategy that uses momentum and term-­structure signals to form a long\u00e2\u20ac\u0090short portfolio of commodity futures. Second, the performance of the strategy is studied before the beginning of the financial crisis at 2007 and compared to the performance of the strategy during the crisis, i.e. after 2007. We find that the strategy performs better during the crisis. Third, in an effort to reduce the risk measures of the strategy, stop\u00e2\u20ac\u0090loss methods are introduced and added to the strategy. Four different stop\u00e2\u20ac\u0090loss methods are implemented: cumulative, exponentially weighted average, consecutive, and full\u00e2\u20ac\u0090portfolio stop\u00e2\u20ac\u0090loss. We find that none of these methods are able to reduce the risk\u00e2\u20ac\u0090measures of the strategy considerably.<\/p>\n

\n\t#230 – Mean Variance Carry Trade Strategy<\/strong><\/p>\n

\n\tReichenecker: Diversification Effect of Naïve and Optimized Carry Trades<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2619678<\/a>
\n\tAbstract:
\n\tThis paper investigates into the diversification effect of optimized and naïve carry trades. Naïve carry trades go long (short) in high (low)-yield currencies. Optimized carry trades select funding and investment currencies by an optimal trade-off between low FX volatility and implied interest rate differential. The results show, that carry trades have a statical and economical benefit for an institutional portfolio. Optimized carry trades have the largest effect on the investor’s portfolio. In particular, optimized carry trades are able to enhance the risk-return profile over the whole observation period and during the financial crisis. The main difference to the existing literature is, that carry trades are not implemented by exchange traded funds, which follow a carry trade strategy. The paper concludes, that investors can boost their portfolio performance, if optimized carry trades are included.<\/p>\n

\n\tThree additional related research paper have been included into existing free strategy reviews during last 2 week:<\/strong><\/u><\/p>\n

\n\t#12 – Pairs Trading with Stocks<\/strong><\/p>\n

\n\tGoncu, Akyildrim: Statistical Arbitrage with Pairs Trading<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2610064<\/a>
\n\tAbstract:
\n\tWe analyse statistical arbitrage with pairs trading assuming that the spread of two assets follows a mean-reverting Ornstein-Uhlenbeck process around a long-term equilibrium level. Within this framework, we prove the existence of statistical arbitrage and derive optimality conditions for trading the spread portfolio. In the existence of uncertainty in the long-term mean and volatility of the spread, statistical arbitrage is no longer guaranteed. However, the asymptotic probability of loss can be bounded as a function of the standard error of the model parameters. The proposed framework provides a new filtering technique for identifying best pairs in the market. Empirical examples are provided for three pairs of stocks from the NYSE.<\/p>\n

\t #14 – Momentum Effect in Stocks<\/strong><\/p>\n

\n\tBerghorn, Otto: Mandelbrot Market-Model and Momentum<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2620112<\/a>
\n\tAbstract:
\n\tMandelbrot has significantly contributed in many ways to the area of finance. He was one of the first who criticized the oversimplifications centered around the early stochastic process models of Bachelier utilizing normal distribution. In his view, markets were fractal and much wilder than classical theory suggests. Additionally, he was a profound critic of the efficient markets hypothesis. Particularly, his work of fractional Brownian motion showed that the independence claim made by that hypothesis is not valid; in addition, he proposed a multi-fractal asset model to reconcile for effects observed in the market. However, it is also known that his vision of fractal markets used fractal trends. Recently, we were able to show that the scaling behaviour of trends, as defined by a specific trend decomposition using wavelets, are the root cause for the momentum effect. Additionally, we were able to show that these trends have fractal characteristics. In this work, we will revisit Mandelbrot’s vision of fractal markets. We will show that the momentum effect discussed heavily in literature can be modeled by the so-called Mandelbrot Market-Model. Additionally, this model shows, from the risk side, that markets are wilder because of trend structures compared with classical models. In conclusion, we derive what Mandelbrot always knew: There are no efficient markets.<\/p>\n

\t #14 – Momentum Effect in Stocks
\n\t#25 – Small Capitalization Stocks Premium Anomaly    
\n\t#26 – Value (Book-to-Market) Anomaly
\n\t#38 – Accrual Anomaly
\n\t#52 – Asset Growth Effect<\/strong><\/p>\n

\n\tFan, Opsal, Yu: Equity Anomalies and Idiosyncratic Risk Around the World<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2611047<\/a>
\n\tAbstract:
\n\tIn this study, we examine how idiosyncratic risk is correlated with a wide array of anomalies, including asset growth, book-to-market, investment-to-assets, momentum, net stock issues, size, and total accruals, in international equity markets. We use zero-cost trading strategy and multifactor models to show that these anomalies produce significant abnormal returns. The abnormal returns vary dramatically among different countries and between developed and emerging countries. We provide strong evidence to support the limits of arbitrage theory across countries by documenting a positive correlation between idiosyncratic risk and abnormal return. It suggests that the existence of these well-known anomalies is due to idiosyncratic risk. In addition, we find that idiosyncratic risk has less impact on abnormal return in developed countries than emerging countries. Our results support the mispricing explanation of the existence of various anomalies across global markets.<\/p>","protected":false},"excerpt":{"rendered":"

\n\tOne new strategies has been added:<\/p>\n

\n\t#271 – Earnings Announcements Combined with Stock Repurchases<\/strong><\/p>\n

\n\tTwo new related research paper have been included into existing strategy reviews. And three additional related research paper have been included into existing free strategy reviews during last 2 weeks.<\/p>","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-614","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts\/614","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/comments?post=614"}],"version-history":[{"count":0,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts\/614\/revisions"}],"wp:attachment":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/media?parent=614"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/categories?post=614"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/tags?post=614"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}