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Impact of US Inflation on Global Asset Returns

August 24, 2021

A lot of attention is centred around inflation in the academic literature. If the inflation is low and oscillates around central banks’ targets, there is not a big fuss around it. However, when inflation gets high, it becomes a hot topic among investors.

The sharp recovery is also accompanied by high inflation, and recent coronavirus crisis recovery has become a hot topic among practitioners. But is the current period of higher inflation truly that bad? Dai and Medhat (2021) show that inflation is not as big a problem as it may seem in the long term. The authors have examined the relationship between US inflation and the performance of global assets such as stocks, bonds, commodities, REITs, factors or industry portfolios. Based on an analysis of both long-term and the most recent sample periods, the results suggest that most assets had positive real returns during high-inflation periods (and low-inflation as well).

The Best Systematic Trading Strategies in 2021: Part 2

August 23, 2021

In the first part of our article, we talked about quantitative strategies which achieved even better results in 2021 than passive US equity investors. Then, we focused more on tendencies and trends among the best quantitative investment strategies. Today we will talk more deeply about specific trading strategies and shortly describe number #10 to number #6 of the best quantitative strategies of 2021.

Modelling the Impact of Climate Change and Policies on GDP

August 19, 2021

Climate change is becoming a central topic among economists, investors, politicians and the general public as well. Scientists warn us that we have to act immediately, but it is not that simple because becoming environmentally friendly is not cheap, and we are somewhat reluctant even though we have only one Earth. Moreover, while fighting climate change might be seen as a cost for developed economies, less developed economies frequently do not have many alternatives to fossil fuels.

A captivating insight to this topic offers a paper by Alestra et al. (2020) since the research provides a model to examine climate change scenarios for GDP forecasting, considering both GDP damage caused by the climate change itself and the impact of measures aimed to mitigate the climate change. It is crucial to emphasise that climate change endangers the economy. Therefore, even though fighting climate change can negatively affect the GDP, not acting might be even worse in the long run.

Quantpedia Premium Update – 17th August 2021

August 17, 2021

Five new strategies have been added.

Five new related research papers have been included into existing strategy reviews and seven short free blog posts have been published during last few weeks. Plus, five trading strategies have been backtested in QuantConnect in the previous two weeks.

The Best Systematic Trading Strategies in 2021: Part 1

August 16, 2021

As of the first half of August, the year 2021 seems to be a phenomenal year for equities. World equities have earned more than +16%, and US equities, even more, topping +20% gains. Is there even any better strategy this year than just holding US equities? Well, yes, there are actually several of them. Are they all tied to US equities? Many of them are, but many of them are not. Some of them are not even tied to equities at all.

Note: This blog is Part 1 of a series. Part 2 is available here, and Part 3 is available here.

Community Alpha of QuantConnect – Part 2: Social Trading Factor Strategies

August 13, 2021

This blog post is the continuation of series about Quantconnect’s Alpha market strategies. Part 1 can be found here. This part is related to the factor strategies notoriously known from the majority of asset classes.

Overall, the factors on alpha strategies provide insightful results that could be utilized. The results particularly point to excluding the most extreme strategies based on various past distribution’s characteristics.

Stay tuned for the 3rd and 4th part of this series, where we will explore factor meta-strategies built on top of the QuantConnect’s Alpha Market.

An Important Analysis of Stock Momentum and Reversal Factors

August 11, 2021

Can we explain stock momentum by industry, sector or factor momentum? Moreover, a similar question could be raised about the short-term reversal. The novel research by Li and Turkington (2021) uses a robust regression model to divide momentum and reversal returns into the main drivers. The individual momentum anomaly that broader market groups do not fully explain exists in the whole sample but is statistically weak. On the other hand, the reversal anomaly is highly significant. Secondly, the traditional 12-months momentum can be better explained by the factor momentum than the industry or sector momentum. Still, the industries, industry groups, sectors, and even factors have distinct drivers, and the anomalies seem different.

New Machine Learning Model for CEOs Facial Expressions

August 9, 2021

Nowadays, it is a standard that fillings such as 10-Ks and 10-Qs are analyzed with machine learning models. ML models can extract sentiment, similarity metrics and many more. However, words are not everything, and we humans also communicate in other forms. For example, we show our emotions through facial expressions, but the research on this topic in finance is scarce. Novel research by Banker et al. (2021) fills the gap and examines the CEOs facial expressions during CNBC’s video interviews about corporate earnings.

Analysis of Systematic Crypto Trading Strategies in 2021

August 6, 2021

We started to systematically search for systematic cryptocurrency trading strategies in academic research approximately two years ago. This article is a short analysis of the performance of systematic crypto strategies in 2021. We conclude that non-price predictors offered advantages over price-based only trading strategies in the previous year-to-date and 12-months periods.

How Olympic Games Impact Stocks?

August 5, 2021

Summer Olympics are a major event that attracts attention from the moment the host country is announced. However, that’s not shocking. The Olympics require a lot of planning, infrastructure building and investments. Still, countries battle for the opportunity to host these events. Undoubtedly, hosting the Olympics is prestigious, helps tourism, and many even argue that it also helps the domestic economy despite the costs of hosting. Therefore, it is natural to expect that the Tokyo Olympics should impact the domestic stock market.