Tag Archives: alpha generation
Slouching towards simulating investment skill
When investment skill is simulated, it is often presented as if it is obvious how to do it. Maybe I’m wrong, but I don’t think it’s obvious. Previously In “Simple tests of predicted returns” we saw that prediction quality need not look like what you would find in a textbook. For example, there was a … Continue reading
Portfolio tests of predicted returns
Exploring the quality of predictions using random portfolios and optimization. Previously “Simple tests of predicted returns” showed a few ways to look at expected returns at the asset level. Here we move to the portfolio level. The previous post focused on correlation. Win Vector Blog points out that gauging prediction quality using correlation can be … Continue reading
Posted in Quant finance, R language, Random portfolios
Tagged alpha generation, MACD, S&P 500
2 Comments
Simple tests of predicted returns
Some ways to explore how good a method of predicting returns is. Data and model The universe is 443 large cap US stocks that have data back to the beginning of 2004. The daily (adjusted) close was used. The model that is used as an example is the default signal from the MACD function of … Continue reading
Smoothing the market for alpha
How to get money to alpha, and vice versa. The problem Let’s focus on two groups: People who have money and want alpha People who have alpha and want money When there is a cross between those two groups, there is happiness. Identifying Group 1 is easy. Identifying people who want money is not difficult … Continue reading
