ARTICLES

Most of the studies on time-series momentum have been performed in the daily, weekly, and monthly timeframes. Relatively less research has been conducted in the intraday timeframe. So naturally, we would ask the question: Does the momentum exist intraday? Reference [1] answers this question. It examined the time-series momentum of the SP500 index in the…

Trend following is a popular trading strategy used by Commodity Trading Advisors (CTA) and Hedge Funds around the world. The traded assets are often futures on commodities, FX, fixed-income, and equity indices. We previously demonstrated that stock indices exhibit trending property in the long term, i.e. their returns are positively autocorrelated. We subsequently developed a…

Testing and validating a trading strategy is an important step in trading system development. It’s a commonly-known fact that a well-optimized trading strategy’s performance often deteriorates after it goes live. Thus, developing a robust strategy that performs well out-of-sample is quite a challenge. To this effect, we previously discussed a multiple testing framework for validating…

The trading literature deals mostly with the design and development of trading strategies. There is very little discussion on the topic of how to properly validate them, and most of the system validation techniques have been developed under a traditional statistical framework. Article [1], however, argued that using a traditional single testing framework is not…

Pair trading or statistical arbitrage is a popular quantitative trading strategy. Basically, we choose a pair of assets for trading, and when the assets’ prices diverge, we bet on them to revert back to the mean. The assets are often stocks, but they can be anything, ranging from commodities, interest rate products, to exchange-traded funds.…

Retail traders are often called noise, or uninformed traders as they contribute in large part to the noise in the stock market. The pandemic just accentuates this effect. A recent paper [1] examined the impact of retail trading on the market during the pandemic. It uses Robinhood traders as the proxy for retail investors and…

Options are complex financial instruments that often attract sophisticated traders and investors. In investment banks and hedge funds, they’re often the instrument of choice when one wants to engage in sophisticated trading strategies such as volatility arbitrage, dispersion trading. Another important role of options is for hedging and risk management purposes. Recently, there is a…

Trading using market sentiment indicators is an approach that analyzes the market sentiment data to make trading and investing decisions. Due to the increasing popularity of social networks, social media data in general and Twitter data in particular have been used growingly in the construction of sentiment indicators. Sentiment analysis can use natural language processing,…