Quantitative trading strategies use quantitative signals and a set of predefined systematic rules to make trading decisions. Strategies operate within parameters based on historical analysis (backtesting) and real world market studies (forward testing). Strategies may be executed manually (by a ...

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Inferring Returns From Minimal Data Points [duplicate]

Possible Duplicate: How much data is needed to validate a short-horizon trading strategy? Suppose I have daily returns for a trading strategy against one month of data. Before starting ...
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1answer
371 views

How does one measure the effect of latency on potential returns?

I am looking to evaluate the hypothetical advantage one trading system has over another in terms of the possible returns given their latency. Irene Aldridge wrote a piece (How Profitable Are ...
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1answer
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Can end-to-day trading be profitable? If not, why? [closed]

Many academics argue that end-to-day trading, where you go long or short before opening and sell your security at the end of the day, is not profitable. Various explanations are given for this ...
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What are the best sources for equity quantitative research?

What are the best sources of quantitative finance research in equities? I will list a couple and note an asterisk if the research is available by request (i.e. non-clients) or online: BAC-Merrill ...
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1answer
418 views

Trading Strategies and Portfolio Constructions based on Cross Sectional Regression? [closed]

I often see trading strategies and portfolio construction that are based on cross-sectional regression. For example, I often see regressing some numbers against some factors. I was wondering how ...
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2answers
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statistical arbitrage option overlay strategies / volatility trading

Here's an interesting trading puzzle that I would love to get the community's input on. Let's say there exists an alpha signal that does a good job of sorting equities expected excess returns over ...
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7answers
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How are cryptography and speech recognition technology applied to forecasting financial markets?

One of the answers to my previous question regarding the strategy of Renaissance Technologies, there was a reference to The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly ...
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Using volatility cycles to switch between trend following & range bound trading? [closed]

"...a low volatility environment is usually a good environment for trend following strategies; see Jez Liberty’s state of trend following report here..." ...
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4answers
976 views

HFT: What is the big differentiator in comparison to other time scales?

High Frequency Trading (HFT) seems to be the big money making mystery machine these days. The purported source of unlimited floods of gelt pouring into the investment shops using it. For me, HFT is ...
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3answers
2k views

Techniques to optimize the placement of orders in market making strategy?

Market making often requires placing and canceling a lot of orders. You have to buy and sell nearly simultaneously, so you need to move orders pretty often to beat other traders. But I would like to ...
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2answers
456 views

Distribution for High Kurtosis

Can you please advise which distribution to follow when your skewness is 0.28 and Kurtosis value is 51. Since it's leptokurtic and positively skewed I would like to fit distribution and also wanted to ...
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5answers
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Is Visual Basic a fast enough for millisecond orders

I have an API that for an order routing platform that is in visual basic. The maximum frequency or orders to exchanges will be milliseconds, where the underlying systems are expected to be able to ...
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5answers
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Proof that you cannot beat a random walk

There is much speculation to what degree financial series are random (and what kind of randomness prevails). I want to turn the question on its head and ask: Is there a mathematical proof that ...
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6answers
2k views

Can social media be applied to algorithmic trading?

Can social media sites, like Twitter, be used to analyze financial markets for algorithmic trading? How much research has been done on this topic?
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5answers
1k views

What are the advantages of switching platforms/languages between strategy development and implementation?

I am interested in coding a medium frequency (trading over minutes to hours, holding for days to weeks) quantitative trading strategy and trading it with Interactive Brokers. I have seen many people ...
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1answer
756 views

How to use macroeconomic indicators for long/short trading strategies?

I am trying to understand how to use macroeconomic data in my trading. I understand that using such data could be used to gauge an overall view of the market and how it's doing as a whole. I have been ...
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2answers
603 views

What quantitative strategies were successful through the 2008 crisis?

Obviously, strategies like "short everything" did well during this period, but getting the future right is one thing and having a robust strategy is another. In particular, many quantitative ...
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1answer
767 views

Can momentum strategies be quantitative in nature?

I have read some papers on quantitative trading strategies and it seems like strategies that focus on mean reversion or statistical arbitrage give signals that are dependent on some quantitative ...
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4answers
868 views

How to properly evaluate backtest returns?

Do you evaluate a strategy in a backtest based on the cumulative returns generated by the strategy (i.e. looking at the cumulative returns of the trades that occur) or do you start with a certain ...
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1answer
1k views

How to apply the Kelly criterion when expected return may be negative?

My concern is how to handle a negative value for the Kelly formula. Even when you have a system that has positive expectancy, you can (and usually will) sustain a number of losses, sometimes ...
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3answers
1k views

How to compute the alpha decay of a strategy?

How can one compute the alpha decay of a systematic trading strategy?
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3answers
2k views

How to combine multiple trading algorithms?

Is it possible to combine different algorithms so as to improve trading performance? In particular, I have read that social media sentiment tracking, digital signal processing and neural networks all ...
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4answers
2k views

Evaluating automated trading strategies: accepted practice

Both for private projects, and for clients, I've been working on code a lot this year to evaluate automated trading strategies. This often ends up turning into the task of how to fairly compare apples ...
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2answers
4k views

What is a medium to low frequency trading strategy and why is it less hyped?

The term high frequency trading has been used quite often recently to refer to trading using real-time tick data (or data aggregated to few seconds) and having an intra-day holding period. How are ...
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5answers
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How many explanatory variables is too many?

When researching any sort of predictive model, whether using ordinary linear regression or more sophisticated methods such as neural networks or classification and regression trees, there seems to ...
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4answers
2k views

Any research on how natural language processing can be used to forecast stocks?

Is there any published research of decent quality linking news or unstructured information to asset returns? I know that Thomson Reuters offers its Machine Readable news (MRN), so somebody must use ...
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3answers
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How to optimally allocate capital among trading strategies?

I'm trying to find an optimal way to allocate capital among trading strategies. "Quantitative Trading" by Ernie Chan claims on page 97 that the optimal fraction of capital to allocate to a given ...
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1answer
979 views

What is the average Sharpe ratio of volatility arbitrage funds?

Where can I get data on performance metrics for volatility arbitrage funds? I am trying to compare the Sharpe ratio of my strategy to those of the major players.
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2answers
520 views

What is a reasonable upper bound on the performance of a daily trading strategy?

I am backtesting an equity trading strategy which trades only once per day. Is there a general rule of thumb for the reasonable upper bound on the rate of return of such a strategy? For example, a ...
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2answers
935 views

How to build a regime-switching model which knows its own limits?

In recent months I've come to the conclusion that there are not only certain regimes in the markets (like bear or bull) but phases where all models fail because we are in uncharted territory. The ...
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3answers
3k views

Papers about backtesting option trading strategies

I am looking for all kinds of research concerning option trading strategies. With that I mean papers that publish results on different option trading strategies properly backtested with real-world ...
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3answers
1k views

What is the ideal ratio of in-sample length to out-of-sample length?

Suppose you are running a portfolio of quantitative strategies and that you develop a new potential strategy to be added to the mix. Assume for simplicity that the new strategy is independent of the ...
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1answer
438 views

Are shorter holding period strategies better?

Consider two statistically identical strategies (identical information ratios, sample size, ratio of transaction costs to total profit, etc.) except that one has a much shorter average holding period. ...
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2answers
2k views

How much data is needed to validate a short-horizon trading strategy?

Suppose one has an idea for a short-horizon trading strategy, which we will define as having an average holding period of under 1 week and a required latency between signal calculation and execution ...
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4answers
662 views

What are the risk factors in analysing strategies?

What do you think of strategies displayed on timelyportfolio.blogspot.com? I really like the fact that there is some code to reproduce the strategies, but they seem very elementary because he does ...
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2answers
2k views

How can I learn about the quantitative aspects of market making in illiquid single stock options?

I would like to learn more about the possible ways of doing quantitative research regarding option market making. In particular, while the mainstream index option market may be very liquid, the ...
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1answer
205 views

What would be the impact of the US Credit Rating downgrade on Crude Oil Prices? [closed]

From a modeling point of view, here are my primary assumptions for Monday: a) I would expect the US$ to depreciate and crude oil to rise in the long term. b) Expect crude oil to dip in the short run ...
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2answers
519 views

Transparent quant products with real track record

A real track record is better than backtesting! I am looking for products, funds, certificates, indices etc. that are based on quantitative trading strategies where the strategies and performance ...