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Offline Algorithms in Low-Frequency Trading

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Re: Offline Algorithms in Low-Frequency Trading

#81

Post by smabie »

kgwgk wrote: post #69
victor106 wrote: post #51

Earlier quoted context omitted.

While I always preached just buying the S&P one risk i've been seeing with it is if, a majority of investors just buy the S&P index, since the index is market cap weighted, it would just make the largest stocks in the index more expensive. This would make the stocks that have less weight in the index or stocks outside the index relatively cheap and obviously offer better returns. Anyone disagree?

Reality seems to disagree: https://www.sebastianstoeckl.com/post/ffdownload/index_files... https://en.wikipedia.org/wiki/Fama–French_three-factor_model... SMB stands for "Small [market capitalization] Minus Big" and measures the historic excess returns of small caps over big caps.

A lot of ff research is not very rigorous and highly suspect imo. it's more likely imo that smb is a risk premia than some sort of alpha factor

Re: Offline Algorithms in Low-Frequency Trading

#82

Post by kgwgk »

smabie wrote: post #81
kgwgk wrote: post #69

Earlier quoted context omitted.

Reality seems to disagree: https://www.sebastianstoeckl.com/post/ffdownload/index_files... https://en.wikipedia.org/wiki/Fama–French_three-factor_model... SMB stands for "Small [market capitalization] Minus Big" and measures the historic excess returns of small caps over big caps.

A lot of ff research is not very rigorous and highly suspect imo. it's more likely imo that smb is a risk premia than some sort of alpha factor

The factors in the Fama-French model are risk premia, I cannot make any sense of what you say.

See for example https://www.msci.com/documents/1296102/1336482/Foundations_o...

Re: Offline Algorithms in Low-Frequency Trading

#83

Post by codeisawesome »

philosopher1234 wrote: post #53
WJW wrote: post #16

Earlier quoted context omitted.

Reading more about things you haven't read about before will increase your total knowledge and therefore make you better off in a holistic sense, yes. In a purely monetary sense, no it will probably not have any effect on your life.

Knowledge is not infinitely accretive

Why not..? Asking because the explanation might end up helping me and also cure folks' HN addictions :D

Re: Offline Algorithms in Low-Frequency Trading

#84

Post by [deleted] »

smabie wrote: post #81
kgwgk wrote: post #69

Earlier quoted context omitted.

Reality seems to disagree: https://www.sebastianstoeckl.com/post/ffdownload/index_files... https://en.wikipedia.org/wiki/Fama–French_three-factor_model... SMB stands for "Small [market capitalization] Minus Big" and measures the historic excess returns of small caps over big caps.

A lot of ff research is not very rigorous and highly suspect imo. it's more likely imo that smb is a risk premia than some sort of alpha factor

[deleted]

Re: Offline Algorithms in Low-Frequency Trading

#85

Post by smabie »

kgwgk wrote: post #82
smabie wrote: post #81

Earlier quoted context omitted.

A lot of ff research is not very rigorous and highly suspect imo. it's more likely imo that smb is a risk premia than some sort of alpha factor

The factors in the Fama-French model are risk premia, I cannot make any sense of what you say. See for example https://www.msci.com/documents/1296102/1336482/Foundations_o...

Sorry, I'm using risk premia incorrectly (quant equities isn't actually my thing).

What I mean is that I don't believe smb truly delivers superior risk adjusted returns. For example, I believe the betting against beta factor (BAB) does, while smb does not.

Re: Offline Algorithms in Low-Frequency Trading

#86

Post by kgwgk »

smabie wrote: post #85
kgwgk wrote: post #82

Earlier quoted context omitted.

The factors in the Fama-French model are risk premia, I cannot make any sense of what you say. See for example https://www.msci.com/documents/1296102/1336482/Foundations_o...

Sorry, I'm using risk premia incorrectly (quant equities isn't actually my thing). What I mean is that I don't believe smb truly delivers superior risk adjusted returns. For example, I believe the betting against beta factor (BAB) does, while smb does not.

We agree then, the size factor has not been really outperforming since it was introduced in the nineties. Maybe the drivers of the outperformace were things like transaction costs and lack of information which are less of an issue in recent times.

For what it’s worth, the value factor is not doing well recently either...

Re: Offline Algorithms in Low-Frequency Trading

#87

Post by smabie »

kgwgk wrote: post #86
smabie wrote: post #85

Earlier quoted context omitted.

Sorry, I'm using risk premia incorrectly (quant equities isn't actually my thing). What I mean is that I don't believe smb truly delivers superior risk adjusted returns. For example, I believe the betting against beta factor (BAB) does, while smb does not.

We agree then, the size factor has not been really outperforming since it was introduced in the nineties. Maybe the drivers of the outperformace were things like transaction costs and lack of information which are less of an issue in recent times. For what it’s worth, the value factor is not doing well recently either...

you sound like a quant. are you l? if so, always like to network/talk/make connections

hmu

Re: Offline Algorithms in Low-Frequency Trading

#88

Post by scruple »

hannofcart wrote: post #35
Schweigi wrote: post #20

Earlier quoted context omitted.

I did make my own option trading algo which is similar to the one in the Git Hub repo (but I used Scala, which gave me additional returns, jk :) ). Return totally depends on the delta of the options you write and the option symbols in your basket. Mine could be configured to be between 10-100+%. The higher the return the more volatile. The idea of using multiple symbols like SPY and TLT is to reduce the tail risk. Bu…

Another way to reduce tail risk when selling options is to simply hedge with a protective call/put at a higher or lower strike respectively. Sufficiently far off strikes will have minimal impacts on returns while reducing tail risk.

These are known as a Poor Man's Covered Calls and Poor Man's Covered Puts.

Re: Offline Algorithms in Low-Frequency Trading

#89

Post by dgellow »

neximo64 wrote: post #75
varyherb wrote: post #52

Earlier quoted context omitted.

Genuine question, does this strike others as immensely off-topic? I'm curious if the parent commenter even opened the link. I'm sure there are applications of generalized knapsack problems (or dynamic programming generally) in options trading, but this isn't it.

Are you a tourist on hacker news? This is almost the defining trait of a HN post.

If you check their profile you can see they created their account 4 months ago, so they are likely to be new here. No need to be disagreeable to make your point.

Re: Offline Algorithms in Low-Frequency Trading

#90

Post by JimBlackwood »

lordnacho wrote: post #43
JimBlackwood wrote: post #41

Earlier quoted context omitted.

Do you maybe have some books you could recommend? I have a strong math background, so that’s not a problem. I have a hard time finding courses or books that cover how these instruments work in some depth.

The problem is the books don't really tell you. They're written in this mathematical way that kinda obscures how to actually think about them practically. If you're more into math maybe stochastic calc will be just fine for you. Here we go anyway: Hull: Futures, Options, and Other Derivatives Natenberg. Don't recall the name, but this is maybe the closest to practical. Paul Wilmott, Quantitative finance. Taleb, Dynam…

Thanks a lot! I’ll check these out!

Interesting comment about the math. For my physics degree, a lot of times it was easier to think about things once I understood more of the math. I’ll see how it goes here.

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