Blog - QuantPedia

Benford’s Law Suggests Bitcoin’s Price Manipulation

September 29, 2020

Bitcoin is quite a controversial topic among the public. Many are interested in the blockchain technology or trade the cryptocurrencies , but the Bitcoin also has many opponents. Most frequently, Bitcoin is criticized for its volatility or a lack of supervision; some even call the Bitcoin a fraud. Yet many argue that blockchain is transparent. Novel research by Peterson examines the price manipulation using Benford’s law and a linkage to the anecdotal evidence of known manipulation. In theory, the distribution of leading digits in numerical data should follow the Benford´s law and any significant deviations usually signal a fraud. According to the results, in the history of bitcoin prices, several frauds were detected. The results have important implication for the Bitcoin; therefore, this research is probably a must-read for anyone interested in cryptocurrencies.

Authors: Timothy Peterson

Title: To the Moon: A History of Bitcoin Price Manipulation

First-Half Month Cash-Flow News and Momentum in Stocks

September 24, 2020

Stock prices react to the new information that investors continually receive from many sources. There are some major events, which are commonly connected with a new piece of information and subsequent reactions of investors. For example, quarterly earnings-announcements are the cause of the post-earnings announcement drift or PEAD. According to the PEAD, prices tend to continue to drift up (down) after positive (negative) news. But news related to quarterly announcements is not the only important information. A novel research paper written by the Hong and Yu explores implications of the month-end reporting, analyst revisions and management guidance that are coming to market usually in the first half of each month and are also connected with drifts that offer practitioners profitable opportunities.

Authors: Claire Yurong Hong and Jialin Yu

Title: Month-End Reporting, Cash-Flow News, and Asset Pricing

Quantpedia Premium Update – 17th September 2020

September 17, 2020

Four new strategies have been added.

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

Settling the Size Matter

September 17, 2020

Equity factors are not as straightforward as they may seem to be. There is an ongoing debate about their usability or expected return since they have a cyclical nature. Moreover, the modern trend of smart beta only fuels this debate. Novel research by Blitz and Hanauer examines the size factor and sheds some light on this elusive anomaly. The size seems to be weak as a stand-alone factor, but it’s far from useless. The academic paper suggests that the size factor can be an important addition to the other equity factors as it helps to unlock the full potential of the quality, value or momentum factors.

Authors: Blitz, David and Hanauer, Matthias Xaver

Title: Settling the Size Matter

The Positive Similarity of Company Filings and the Cross-Section of Stock Returns

September 10, 2020

The usage of alternative data is now a main-stream topic in investment management and algorithmic trading. So let’s together explore the textual analysis of 10-K & 10-Q filings and analyze how these datasets could be used as a profitable part of investment portfolios. We invite you to read this short summarization of the research. Full version can be found on the SSRN.

ETF Liquidity

September 3, 2020

Exchange-traded funds (ETFs) have become popular and important investment vehicles in the financial markets. However, that is not a shock given the numerous benefits connected with ETFs. Naturally, they have caught the interest of academics, and there is plenty of literature about strategies on ETFs. While the profits and trading strategies are probably the most important research topics for practitioners, liquidity in the financial markets is almost equally important. Concerning liquidity in the ETFs, novel research by Pham et al. shows when exactly are ETFs the most liquid. Looking on the spreads, they are the lowest at market close. Such a finding can be an essential part of an optimal trading position making, where the aim is to minimize the trading costs.

Authors: Pham, Son Duy and Marshall, Ben R. and Nguyen, Nhut (Nick) Hoang and Visaltanachoti, Nuttawat

Title: Predicting ETF Liquidity

Quantpedia in August 2020

September 1, 2020

Once again, welcome to our summary of Quantpedia’s research. Ten new Quantpedia Premium strategies have been added into our database, and eleven new related research papers have been included in existing Premium strategies during last month.

Additionally, we have produced 15 new backtests written in QuantConnect code. Our database currently contains over 340 strategies with out-of-sample backtests/codes.

Also, four new blog posts, that you may find interesting, have been published on our Quantpedia blog:

Quantpedia Premium Update – 1st September 2020

September 1, 2020

Five new strategies have been added.

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

Pre-Election Drift – Video

August 28, 2020

The presidential campaign is becoming hotter as we are moving closer to this year’s election. But we still have enough time to dig deeper into data about the past elections and prepare for autumn. Therefore, we have prepared a short video recapitulation of our paper on the pre-election drift.

Pre-Announcement Returns

August 26, 2020

Earnings announcement days are really important dates in a usual yearly corporate routine. The stock market usually reacts sharply on earnings announcement news and stocks on average earn statistically significant return excess of the market over the short window centred around the announcements. But how does the movement of stocks look before earnings announcement? The recent research paper written by Gao, Hu, and Zhang analyzes price action before and after earnings announcement and shows that a majority of the announcement month premium is realized during the pre-announcement period. Stocks with higher levels of uncertainty (stocks are sorted based on their option implied volatilities) experience larger pre-announcement returns and more uncertainty resolution during the pre-announcement period…

Authors: Gao, Chao and Hu, Grace Xing and Zhang, Xiaoyan.

Title: Uncertainty Resolution Before Earnings Announcements