Quant investing: getting the big things right

Keep it sweet and simple. That’s the fit-for-publishing version of KISS. And it is critical for being successful in the long term with quant investing. The biggest mistake I see new quant investors make is over complicating things. This just leads to failure. By focusing on a few high impact factors a quant strategy can still significantly outperform while being relatively easy to maintain. In today’s post I will present a KISS quant strategy has provided plenty of outperformance while being easy to maintain. Before I dive into the KISS quant strategy let me throw some stats at you. I … Continue reading

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Quant investing: the profitability factor

What would you think of a quant strategy that only invests in the most profitable companies? Would it under perform the market or beat the market? If you’re an efficient market person you may think that higher profitability must be priced into equities and therefore at best the strategy would match the market. Not so. Turns out that profitability is quite a durable factor and is only beaten by momentum and value. In this post I’ll take a look at some of the data on the profitability factor and how it can be applied in a simple quant strategy. First, … Continue reading

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Portfolio sheets are back

Quick note. I have now embedded the Google sheets that contain the GTAA13, AGG3, AGG6, and Antonacci GEM, DMFI portfolios directly on the blog. I have upgraded the Google code a bit and implemented auto sort so they should be a bit more robust than in the past. Let’s hope Google cooporates. These are informational only. I don’t do any other tracking of these portfolios other than this. I highly recommend Allocate Smartly for detailed tracking and performance reporting. The sheets are sub menu items in the Portfolios Menu above. Here are the direct links. GTAA Based Portfolios Antonacci Based … Continue reading

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Quant strategies: 1H 2017 performance update

It’s time to get back to talking about quant portfolios. I haven’t posted on any quant related stuff in a while. Doesn’t mean anything. I’ve just been focused on other things. And my quant portfolios require very little maintenance so once they’re up and running there is not much to do. At least there shouldn’t be much to do. The temptation to fiddle and tweak is quite strong but usually leads to worse results in my experience. Anyway I have some more quant posts coming out over the next few weeks which will kind of re-balance the postings in the … Continue reading

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Mapping the pros: composite economic indicators – july 2017

In today’s post I’ll update the composite indicator heat map for July. See this post for an introduction to the composite indicators and the heat map. Below is the composite indicator heat map as of Friday, June 30, 2017. We’ve added in release dates for any indicators that have not been reported yet for the month of May. In general, we have the same picture as last month. All the composite economic indicators are showing green confirming what the individual economic indicators were telling us earlier this month. We have had some weakening in the indicators, especially the higher frequency ones like BCI … Continue reading

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Mapping the top economic indicators – june 2017

Before I start today’s post, I’d like to announce my plans for an economic trends newsletter. The newsletter will expand on the topics and concepts of using economic indicators to track the economy and more importantly to improve investing results through their use in quant or TAA investing systems. I’m looking for a handful or so of beta testers to flesh out the details of the newsletter for a few months before it goes live. If you’re interested drop me an email. On to today’s post… In this post we’ll update the top 6 economic indicators as of mid June 2017. The … Continue reading

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Mapping the pros: composite economic indicators – june 2017

In today’s post I’ll update the composite indicator heat map for June. See this post for an introduction to the composite indicators and the heat map. I’ll also introduce a new composite indicator based on the COMP system I introduced here. Below is the composite indicator heat map as of Wednesday, May 31, 2017. The composite indicator heat map is all green for this month. No imminent recession is signaled. This confirms what the more timely individual indicators and the COMP indicator are telling us. When the composite score exceeds 62 the scoreboard will flash yellow and when it exceeds 106 it will go red. The composite … Continue reading

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Mapping the top economic indicators – may 2017

In today’s post we’ll update the top 6 economic indicators as of mid May 2017. The final indicator for April was released yesterday. Each of the 6 indicators is updated with April data. For background on the top 6 see here. The table below shows the current heatmap for the top 6 indicators. All of the 6 indicators remain green for this month. 2 of the indicators showed improvement, 4 showed some deterioration. None are even near a warning signal. This also means that there is no trigger for the COMP indicator which means there is no possibility for the SPY-COMP system to … Continue reading

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Mapping the pros: composite economic indicators – may 2017

In today’s post I’ll update the composite indicator heat map for May. See this post for an introduction to the composite indicators and the heat map. I’ll also introduce a new composite indicator based on the COMP system I introduced here. Below is the composite indicator heat map as of Friday, April 28, 2017. A few changes for this month. My partner in crime, Tony, takes care of all these updates and is responsible for the new COMP model as well. We deleted the Capital Spectator’s CRPI and MMRI since he doesn’t publish them on a regular basis; they’re only available with reasonable lag time … Continue reading

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TAA vs buy and hold in overvalued markets

US stocks are expensive. There seems to be article after article on the expensiveness of US stocks these days. Plus, bonds in general are really really expensive. Both US stocks and all bonds are in the top (90th+ percentile) tiers of expensiveness relative to history. As Cliff Asness of AQR points out, the problem is that they are both at these expensive levels at the same time, which hasn’t happened ever. That means that a portfolio of US stocks and bonds (50/50, 60/40, take your pick) has a very low expected return going forward. Maybe the lowest ever. OK. Now what? … Continue reading

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