own-research - QuantPedia

What’s the Best Factor for High Inflation Periods? – Part II

April 13, 2022

This second article offers a different look at high inflation periods, which we already analyzed in What’s the Best Factor for High Inflation Periods? – Part I. The second part looks at factor performance during two 10-year periods of high inflation. What’s our main takeaway? The best hedge for a high inflation period is the value or momentum factor. Other promising factors (energy sector, small-cap stocks, or long-run reversal) don’t perform as consistently as value and momentum.

What’s the Best Factor for High Inflation Periods? – Part I

April 11, 2022

Another period of long sustained high inflation is probably right around the corner, as the Russia-Ukraine Conflict keeps evolving, and its end is nowhere to be seen. In this article, we analyzed the Consumer Price Index from the Federal Reserve Bank of Minneapolis, which includes the rate of inflation in the USA since 1913. We found multiple years during which the inflation was abnormally high and analyzed the performance of the known equity long-short factors. The factors with the highest average performance are HML (value stocks), long-term reversal, momentum, and energy stocks. On the other hand, tech stocks, bond-like assets, and the SMB factor should be avoided during the high inflation periods.

Nuclear Threats and Factor Performance – Takeaway for Russia-Ukraine Conflict

March 31, 2022

The Russian invasion of Ukraine and its repercussions continue to occupy front pages all around the world. While using nuclear forces in war is probably a red line for all of the mature world, there is still possible to use nuclear weapons for blackmailing. What will be the impact of such an event on financial markets? It’s not easy to determine, but we tried to identify multiple events in the past which were also slightly unexpected and carried an indication of nuclear threat and then analyzed their impact on financial markets.

Trend-following and Mean-reversion in Bitcoin

March 15, 2022

Indisputably, trend-following and mean-reversion are two key concepts in quantitative investing or technical analysis. What about the Bitcoin? Are there trend-following or mean-reversion patterns? Or are both effects present and co-exist? In this short research, we examine how Bitcoin’s price is affected by its maximal or minimal price over the previous 10 to 50 days. Our finding shows that when the BTC is at the local maxima, it tends to continue trending upwards. Furthermore, the local minima are also connected with abnormal price action.

Factor Performance in Cold War Crises – A Lesson for Russia-Ukraine Conflict

March 8, 2022

The Russia-Ukraine war is a conflict that has not been in Europe since WW2. And it has great implications not only on human lives but also on security prices. It bears numerous characteristics of the cold war crises, where two nuclear powers (Soviet Union and USA/NATO) were often very close to hot war or were waging a proxy war in 3rd countries. We thought it might be wise to look at similar periods from the past to understand what happens in such situations. We selected five events and analyzed the performance of main equity factors (market, HML, SMB, momentum & 2x reversal) and energy and fixed income proxy portfolios.

What’s the Relation Between Grid Trading and Delta Hedging?

February 23, 2022

Delta hedging is a trading strategy that aims to reduce the directional risk of short option strategy and reach a so-called delta-neutral position. It does so by buying or selling small increments of the underlying asset. Similarly, grid trading is a trading strategy that buys/sells an asset depending on its price moves. When the price falls, it buys and sells when the price rises a certain amount above the buying price. This article examines the similarities between delta hedging and grid trading. Additionally, it analyzes numerous versions of grid trading strategies and compares their advantages and disadvantages.

Are There Seasonal Intraday or Overnight Anomalies in Bitcoin?

February 18, 2022

At Quantpedia, we love seasonality effects, and our screener includes several strategies that exploit them. These anomalies are fascinating since they usually offer a favorable risk and reward ratio and are commonly invested only during short periods. Frequently, these strategies are valuable additions to portfolios because they are not that sensitive to overall market performance. This short article presents a brief examination of some possible Bitcoin seasonalities.

Lottery Effect in ETFs Across Several Asset Classes

January 17, 2022

Indisputably, we are witnesses of an ETF mega boom. From passive to active ETFs, their numbers seem to be ever-increasing. Since these exchange-traded funds can be excellent (accessible, transparent, liquid) instruments, it is a great necessity to examine their possible usage in active and systematic trading or investing. Therefore, the short research critically assesses the possibility of using ETFs in the Skewness Trading Strategy.

A Primer on Grid Trading Strategy

December 27, 2021

Grid trading is an automated currency trading strategy where an investor creates a so-called “price grid”. The basic idea of the strategy is to repeatedly buy at the pre-specified price and then wait for the price to rise above that level and then sell the position (and vice versa with shorting and covering). We will explore the basics and show favorable and unfavorable scenarios in the first article about this trading style. Later articles will dig deeper and investigate how Grid trading is related to other systematic trading strategies.

Estimating Rebalancing Premium in Cryptocurrencies

December 13, 2021

Our new article investigates “rebalancing premium” or “diversification return” in cryptocurrencies which can be achieved by periodically rebalancing portfolios. We analyze whether the daily/ monthly rebalanced portfolios outperform a simple buy-and-hold portfolio of cryptocurrencies and under which conditions. Additionally, we also look at the various combinations of volatile cryptocurrency portfolios with low-risk bonds.