Research

Human AI

Abstract Finance is a key milestone for AI. Imagine coming back from vacation and talking to your virtual assistant about your investment portfolio and wondering how she does it, quarter after quarter, year after year. Managing money is the real test for human AI. It has to talk, it has to think, it has to…

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Architecture of Data

The rich do not always get richer. Explaining this probabilistically resolves a 100-year-old puzzle, opening up opportunities for smart beta portfolios, an architecture of complexity and eventually an architecture of data that could become Web 4.0. Group vs. Component Financial markets have moved from regional to global, from one asset to Intermarkets [1]. This has…

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Top 10 on SSRN

The work of Jules Regnault, Francis Galton, John Rae and Vilfredo Pareto covered Duration, Behavior, and Value. Regnault talked about stock market science, statistical nature of Value, duration importance and price behavior. Galton laid the foundation for the robust behavior of Reversion in natural phenomenon. Rae introduced the idea of intertemporal choices which showcased time…

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Adaptive Market Hypothesis

Adaptive Market Hypothesis (Study of Assumptions) Abstract Adaptive Market Hypothesis (AMH) embraces Efficient Market Hypothesis (EMH) as an idealization that is economically unrealizable, but which serves as a useful benchmark for measuring relative efficiency. AMH’s adaptability to changing dynamics of the market suggests that investors are potentially capable of an optimal dynamic allocation. There is…

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The Duration Factor

Read the paper on SSRN Abstract: John Rae’s inter-temporal choices explained the statistical nature of human behavior in 1834. However, despite the subject’s insight in the objectiveness of behavior, inter-temporal choices remains a peripheral science. This paper takes a sequential approach to question how inter-temporal choices could be behind human behavior, behavioral anomalies and even…

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Is Reversion Statistical?

Abstract There is no disagreement regarding the statistics of mean reversion. What goes up comes down and vice versa. Campbell and Shiller (1988) said that the simple theory of mean reversion was basically right. Fama and French (1989) also suggest that valuation ratios forecast five-year returns with quantifiable accuracy. It is the failure of reversion…

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The Size Proxy

Abstract Though ‘Size’ is the most important factor explaining stock market returns, the possibility of size being a proxy was first mentioned in Banz (1978). Even after forty years of factor investing the industry is still looking for answers. This paper chronologically lists the research on ‘Size’ and why the question regarding ‘The Size Proxy’…

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What is Stationarity?

Marina Ferenț-Pipaș, Data Scientist marina.ferent@orpheusindices.com Mean Reversion Mean reversion has been the corner-stone in differentiating the random from the non-random behavior. Stationarity is used to identify mean reversion in a time series. A critical role in classical time series analysis is played by the concept of stationary processes. Stationary processes are easier to be modeled…

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Arbitraging Anomalies on SSRN

In finance, arbitrage is an essential framework to understand asset pricing. However, the study of anomalies also called as premiums, which are not arbitrageable has led to a debate regarding whether markets are efficient in correcting price imbalances or is inefficiency a reality. This is why the Economics Nobel prize 2013 was awarded to both the behavioral…

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Reversion Diversion Hypothesis

Abstract Information is an assumption for modern finance. The Efficient Market Hypothesis uses information to back its case of efficiency. The EMH case is weak, but as Martin Swell (2011) explains, until a flawed hypothesis is replaced by better hypothesis, criticism is of limited value. This paper challenges the information assumption in EMH based on…

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Lupin's 1,000 days

Dacian Jurj dacian.jurj@orpheusindices.com A system based investing is different from news based investing. It’s hard to quantify news and how up or down the market would go. This is why we let our models do the work for us. The current India Active has outperformed India top 50 by 5.27% year to date. Today we…

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Style Box, broken or fixed?

Style box for the investor is a visual representation of investment characteristics for stocks, fixed income and mutual funds offered as a comparative tool to investors around the world for helping them determine asset allocations based on their risk preference. Should an idea nearing 30 years of history need revisiting? Is the style box a good visual representation?…

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The Disruptive Active

Disruption Disruption is happening all the time. And it will happen in the active investing business too. What is active investing? Anything which starts from intraday trading to mutual funds to hedge funds can be bundled as active investing. Anything which is designed to conserve capital (even if it does not) and deliver absolute returns…

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The Smart Inverse

Is there was a way to build a portfolio of non-leveraged short positions? This is new territory because industry’s focus on building models for a long only focused market, but also because short, and long-short enter the alternative or hedge territory, an underrepresented segment globally. The idea of a short index does not exist while the short…

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Ranking Global Indices

For all the BRICS trashing there is the Jiseki seasonality setting up a case for an underperformer getting ready to outperform. In this week TIME TRIADS issue we looked at top 10 regional Indices viz. Paris CAC 40, Hang Seng, DJ Stoxx 50 Index Euro, Bovespa Brazil, Frankfurt DAX, Nikkei 225, Shanghai Composite, BSE 30…

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