Apparently, according to the internet, the first rule of stealth mode is not to be that stealthy.. I don’t know, didn’t know, nor cared too much about that. For the last 2-3 years I’ve been working a lot in complete secrecy on a quantitative trading strategy. Only a few close friends and some family knew… Continue reading The First Rule of Stealth Mode Is..
Tag: Behavioral Finance
Excessive Optimism and Analyst Recommendations
This blog post taps into some of the theories outlined by behavioral finance. Specifically I’m going to look at research done on what is called overconfidence. Overconfidence among investors can manifest itself in many ways. One of these forms is excessive optimism (or pessimism) with regards to beliefs in future outcome. Carleton, Chen, and Steiner… Continue reading Excessive Optimism and Analyst Recommendations
The profitability of technical analysis in a high frequency setting
UPDATE: The report has been completed, available here. One busy month behind me, and another one up next. Currently doing exam revisions and had some rather time consuming coursework so far, which has sadly prohibited me from doing anything here on this blog. So, to make up for a month of no blog activity I’ll set aside… Continue reading The profitability of technical analysis in a high frequency setting
A deep dive into the January barometer
So as it’s still a rather fresh 2011, and January so far is looking a little mixed, I thought it would be fun to do a deep dive into a calender effect called the January Barometer. Many people seem to confuse this with the January Effect, but they are different things.
The January barometer states that the direction (of the S&P 500 at least) during January can be viewed as an indicator for the following 11 months. So in other words, if the S&P 500 ends up this January, that would be an indication of a good coming year overall and vice versa.
There’s no specific reasoning given for why it should be like this. One could theorize that there might be some form of structural break as we enter a new year with new budgets and everything. So say the general economy was heading up, then more would be invested, starting in January and then continuing.
But why just theorize? There’s easily available data we could download and look at. And that’s just what I did.
Decoding the psychology of trading
The Financial Times recently had an article titled “Decoding the psychology of trading” where they write about a behavioral finance based fund named MarketPsy, using some sort of linguistics analysis. When I hear the words behavioral finance I often start thinking of group behavior like what we find in many types of animals. I do sense however that I am a bit skeptical with regards to the approach MarketPsy has taken.