BuyWrite and PutWrite

Let's exclude all the historical data that would impact our strategy the most negatively, that way we can peddle the system on an unsuspecting public. BRILLIANT!A spokesman from the CBOE sent me this note in response to why the CBOE didn't include pre-1988 results in their option selling indices. I disagree completely of course (especially with the...

Tracking the Hedges and Activists

A recent article in BusinessWeek highlights a topic readers of World Beta have been privy to for some time - that following the top investors can lead to abnormal returns. Another paper, "The Investment Value of Mutual Fund Portfolio Disclosure",tackles the subject.ABSTRACTThis paper uses disclosed mutual fund portfolio holdings to develop stock selection models. Our models aggregate portfolio...

Extreme Investing

I REALLY like this paper. Looking for extra information at the extremes makes more sense to me than just decile stats. Here is the AlphaLetters Journal review, and if you would like more in-depth analysis, check out the always thorough CXO Advisory. The author's website can be found at Improving the P/E Ratio.Category: Value, Extreme value...

The Return of Risk

I'm a big fan of Marc Faber, and not just because we share a great surname. I especially enjoy reading his Barron's roundatable interviews - he always seems to have quirky picks that are usually spot on (sometimes spectacularly so). Seriously, how many other market gurus do you know that have a lifestyle tab on their webpage?One...

Head and Shoulders – Journal of Financial Econometrics

One of the most popular technical patterns that chartists follow is the head and shoulders pattern. The definition from Investopedia:1. Rises to a peak and subsequently declines.2. Then, the price rises above the former peak and again declines.3. And finally, rises again, but not to the second peak, and declines once more.The first and third peaks are shoulders,...

Saving The World With Plankton

When I moved to California after graduation, I spent some time mulling my options with job prospects. I had just wrapped up my first job in DC as a biotech equity analyst while taking grad classes at Hopkins, and was considering jobs in both the investment and biotech industries (SF is a great locale for both). One...

Managed Futures and REITs

First, a fantastic review of hedge fund replication from Conquest Capital. Here is an interview with Marc H. Malek, Managing Partner at Conquest Capital. From the interview:In our study, we found that most CTAs exhibit a very high correlation (70-90%) to one or more simple breakout strategies consisting of trading a diversified group of markets by buying...

AlphaLetters Weekly Paper Review #4 & #5

Quant working paper reviews from the guys at AlphaLetters (readers of the blog should recognize the first one!):Article 3.Category: Strategy, payout yieldTitle: On the Importance of Measuring Payout Yield: Implications for Empirical Asset PricingAuthor: Jacob Boudoukh, Roni Michaely, Matthew Richardson, Michael R. RobertsSource: SSRNworking paperLink: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=579798Summary:This paper tries to improve the traditional dividend payout yield by using total payout...

Canadian Salmon Cannot Lose at Checkers

Chinook! From the NYTimes:Checkers has been solved.A computer program named Chinook vanquished its human competitors at tournaments more than a decade ago. But now, in an article published Thursday on the Web site of the journal Science, the scientists at the University of Alberta who developed the program report that they have rigorously proved that Chinook, in a...

Trade Like Lee Ainslie – Maverick

One of the unique features of the Virginia undergrad program in Engineering is the requirement that every student must write a thesis to graduate. The school then archives all of the papers in the library. Mine, (titled "Recombinant Adenovirus Mediated A1-Adenosine Receptor Over-Expression in the Mouse Myocardium to Treat and Prevent Myocardial Infarction"), was written over the...