Quantpedia Update

Two new strategies have been added:

#116 – Insider Trading Combined with Share Repurchases

#117 – Lottery Effect in Stocks

And several new related research papers have been included into existing strategy reviews.

Quantpedia Update

Two new strategies have been added:

#114 – Dividend Month Anomaly

#115 – Short-Term Residual Reversal

And several new related research papers have been included into existing strategy reviews.

Quantpedia Update

Two new strategies have been added:

#112 – Acceleration Effect Combined with Momentum in Stocks

#113 – 52-Weeks High Effect in Stocks

And several new related research papers have been included into existing strategy reviews.

Quantpedia Update

Three new strategies have been added:

#109 – Accrual Volatility Anomaly

#110 – Speculators' Effect in Commodities

#111 – Hedgers' Effect in Commodities

And several new related research papers have been included into existing strategy reviews.

Pairs trading (sometimes known as statistical arbitrage) is a very popular trading strategy between traders. It has also become a favorite strategy for investigation by financial academics. The most well-known variant is stock's pairs trading where a trader buys and simultaneously sells two correlated stocks when they diverge from their normal synchronized moves. The equity universe is broad and therefore it is time-consuming to look for pairs which are correlated or cointegrated (aka. they move together). But isn't there some simple version of this strategy?

Academics have shown that momentum strategies are able to generate extraordinary excess returns in virtually every asset class (stocks, FX, commodities) or their respective parts (equity sectors, industries, countries). This includes momentum into the standard strategy set of nearly each portfolio manager. But is momentum applicable also to market anomalies or factor portfolios?

   Let's view one totally unconventional trading strategy.

   Sport betting is the favorite entertainment of many people.. However bookmakers are reportedly more skilled at predicting game outcomes than bettors and betting markets are therefore extraordinarily efficient. Betting shops' wide spreads are an additional obstacle. This means that it is exceptionally hard to beat the house in this game. Luckily, betting shops are not the only place where we can place bets on match results as several soccer teams are publicly traded on equity markets. Shares of those clubs are sensitive to teams' game results, so are there any inefficiencies?

   The WTI-Brent spread is the difference between the prices of two types of crude oil, West Texas Intermediate (WTI) on the long side and Brent Crude (Brent) on the short side. The two oils differ only in the ability of WTI to produce slightly more gasoline in the cracking ratio which causes WTI’s slight pricing margin over Brent. As both oils are very similar their spread shows signs of strong predictability and usually oscillates around some average value. Could we use a trading strategy and exploit this spread's reversion?

   Crude oil is one of the most important commodities in the current global world. Simple logic says that oil prices should predict economy’s performance and therefore should also have some predictive ability for equity returns. Is the price of oil really such a useful predictor?

   The short-term contrarian strategy of buying stocks which are past losers and selling stocks which are past winners is well documented in academic literature. But does this effect work within different markets and with different instruments? Is it possible to create less complicated short term reversal strategy with futures?