Weekly Recap
Research on quant investing 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
From Crypto to NTFs: Identifying the New Wave Of Digital Investors (Balietti et al.)
Using survey data, this paper explores what characterizes owners of NFTs compared to other crypto users.
The Ethereum Spot ETF Basis Trade Explained (Krause)
This paper explores the properties and dynamics of a potential basis trade between Ethereum spot ETFs and futures contracts.
Derivatives
A New Index of Option Implied Absolute Deviation (Dotsis)
This paper proposes a new option measure of non-normalities in returns, finding significant return predictability out-of-sample.
The Market for 0-Days-to-Expiration: The Role of Liquidity Providers in Volatility Attenuation (Adams et al.)
Days with trading in short-dated options have had lower intraday volatility than other days, as market makers suppress volatility when hedging their long delta and gamma positions.
Low Risk, High Return: Improving Option Writing Performance with Put-Call Ratios (Liu and Lo)
This paper explores several option-writing strategies and finds significant gains in Sharpe ratios by conditioning the strategies on put-call ratios.
Economics
The Golden Revolving Door (Cen et al.)
The study finds that firms with government ties significantly increase imports during trade conflicts, benefiting from tariff exemptions and political connections.
Equities
The Power Of Price Action Reading (Zarattini and Stamatoudis)
The authors suggest there might be benefits of combining discretionary and systematic trading, and present a trading strategy around gaps.
Political Stability as a Risk Factor in Global Markets (Jeutang et al.)
The paper analyzes how political stability influences global stock markets, identifying it as a significant risk factor, especially in emerging markets.
Playing the Market: Lottery Stock and Bitcoin Comovement (Hoang and Yang)
Lottery-like stocks are found to have a higher exposure to Bitcoin than other stocks, amplified in periods of high gambling sentiment.
Visual Deception in Financial Market (Gao)
The paper explores how visual scaling in financial charts can mislead investors' perceptions of returns and volatility, affecting their decision-making.
Geopolitical Risk Factors and Stock Returns: A Global Analysis (Ali and Rafi)
The study analyzes how geopolitical risks influence stock returns in 40 countries, showing significant short-term predictive power.
ESG
Duration-driven Carbon Premium (He et al.)
The carbon premium reflects the return of brown firms over green firms and is shown to be linked to the duration of firms’ cash flows.
Machine Learning and Large Language Models
GraphCNNpred: A stock market indices prediction using a Graph based deep learning system (Jin)
A graph-based deep learning model improves stock market return predictions over baseline algorithms, enhancing Sharpe ratios.
LLM-Select: Feature Selection with Large Language Models (Jeong et al.)
Large language models are shown to have a significant ability in identifying the most predictive features, surpassing that of more traditional approaches.
Mutual Funds
Decoding Mutual Fund Performance: Dynamic Return Patterns via Deep Learning (Guo)
The paper demonstrates that a deep learning model can effectively predict mutual fund performance.
Portfolio Optimization
Markowitz and the CAPM (Simaan)
This paper explores how the Capital Asset Pricing Model (CAPM) relates to the mean-variance approach, with a focus on what happens when certain CAPM assumptions are not enforced.
Integrating Minds: An Ensemble Approach to Portfolio Optimization (Shi et al.)
The authors propose an ensemble technique to mitigate problems with the classical mean-variance optimization, yielding higher risk-adjusted returns.
Blogs
The Lifting Power of Outliers (ATS Trading Solutions)
Did Inflation Kill the CAPM? (Pim van Vliet)
Podcasts
Carry On: Demystifying the Carry Trade with Rodrigo Gordillo & Adam Butler of ReSolve (ReSolve Asset Management)
Tap Into The Same Advantage That Hedge Funds Do | Andrew Beer (Adam Taggart - Thoughtful Money)
The Cambria Chesapeake Pure Trend ETF (MFUT) | Jerry Parker (The Meb Faber Show)
A Wealth of Experience Trading Diversified Strategies in Futures & Equities with Perry Kaufman (The Algorithmic Advantage)
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