An astute reader suggested reproducing the results from a recent article on regime analysis by Kritzman et al., Regime Shifts: Implications for Dynamic Strategies in FAJ (May / June 2012). This is a fun exercise to be conducted over a series of posts, as doing so illustrates several important economic principles and some elegant mathematics. This post...

Tadas asked an interesting question in his recent post: Where did all the finance bloggers go? A variety of folks gave thoughtful replies: Josh Brown, Flex Salmon, David Merkel, Scott Bell, the Macro Men, and bunch of anonymous professional traders. Undoubtedly, there is truth in all their observations. Yet, perhaps there is a common root cause at work,...

GOOG unexpectedly disclosed their Q3 earnings early last week, on October 18th. While earnings were marginally interesting, much more amusing was the corresponding hiccup in intraday trading. This event provides an opportunity to dig into TAQ data, view through a HFT lens, and build intuition from some elegant ideas due to Mendelbrot, Clark, and Ané. Begin...

Quantivity disliked undergrad macroecon, as it was largely a waste of time: fancy theory lacking compelling evidence, amplified by no consensus within the field à la saltwater versus freshwater. Few folks could be blamed for such flippancy, as it was mostly harmless throughout the great moderation. In fact, traders took apparent pride in their ignorance...

Quantivity disliked undergrad macroecon, as it was largely a waste of time: fancy theory lacking compelling evidence, amplified by no consensus within the field à la saltwater versus freshwater. Few folks could be blamed for such flippancy, as it was mostly harmless throughout the great moderation. In fact, traders took apparent pride in their ignorance...

Index Return Decomposition prompted several readers to inquire about forecasting the signs of returns, as implied by the decomposition variable. This is an interesting topic worth review, quick survey of intuition from the literature, and some R code for exploratory analysis. This topic is known as direction-of-change forecasting in the literature....