Weekly Recap
Research on investing, macro, and trading.
Welcome to this week’s collection of links to the latest research and insights on quant investing. Below, you’ll find a curated list where each title links to the source for more information. Thank you for reading!
Crypto
Blockchain Currency Markets (Ranaldo et al.)
This paper offers an in-depth study of blockchain currencies and their relation to traditional currencies with a particular focus on the EURC/USDC pair.
Currencies
Cointegration-Based Strategies in Forex Pair Trading (Lemishko et al.)
The paper proposes a FX trading strategy using cointegration to identify profitable opportunities.
An Anatomy of Currency Strategies: the Role of Emerging Markets (Chernov et al.)
Incorporating emerging market currencies is shown to improve performance for currency strategies, particularly for the carry factor, and hedging out unpriced risks leads to significant improvements in Sharpe ratios.
Derivatives
Intricacies of Implementing Derivatives: Insights from Asset Management Experts, Part 1 (Fabozzi)
This paper contains a range of examples and mini cases of how asset managers use derivatives in practice to hedge out unwanted exposures or express speculative views.
Empirical Asset Pricing
The Divergence of Street from GAAP Earnings and Stock Mispricing (Yang and Wu)
The paper examines how discrepancies between Street and GAAP earnings predict stock mispricing and future returns, revealing managerial biases.
Volatility Targeting Is Trendy: Documenting the Trend Exposure Embedded in Volatility-Managed Strategies (Hood and Raughtigan)
The paper argues that the apparent outperformance of volatility-targeting strategies over buy-and-hold approaches is largely due to their exposure to trend-following strategies.
Machine Learning and Large Language Models
Trading Volume Alpha (Goyenko et al.)
The paper explores how predicting the trading volume for individual stocks using machine learning can enhance portfolio performance by optimizing trading costs and tracking errors.
Dumb Money? Social Network Attention Herding, Sentiment, and Markets (Huang and Shum Nolan)
The authors construct sentiment measures for individual stocks using millions of posts from WallStreetBets, proposing a trading strategy that generates a significant alpha.
Macro
Measuring Macroeconomic Tail Risk (Marfe and Penasse)
The paper develops a method to estimate macroeconomic tail risk, predicting crises and stock returns using international data without relying on asset prices.
Are We Fragmented Yet? Measuring Geopolitical Fragmentation and its Causal Effects (Fernandez-Villaverde et al.)
The paper introduces a new index to measure geopolitical fragmentation, revealing its immediate negative impact on the global economy.
Portfolio Construction
Regime-Based Strategic Asset Allocation (Bouyé and Teiletche)
This paper explores a regime-based approach to strategic asset allocation by incorporating macro regimes into the portfolio construction process.
Quant Blogs
Macroeconomic data and systematic trading strategies (Macrosynergy)
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