Alpha Trading Strategies

Alpha Trading Strategies - Articles & White Papers

This section contains white papers and articles on "alpha trading strategies" - methodologies for adding excess return in an investment portfolio. For any given asset class or investment type, there are many possible approaches to alpha creation. Algorithmic and rule-based strategies are increasing in popularity, as is high-frequency trading. The most popular items in our library include research on "value and momentum", research on factor models, smart beta and alternative beta. Studies on the size effect, share repurchase announcements, return seasonality, pairs trading and relative-value arbitrage, mean reversion, neural networks and earnings surprises, all explore different paths that can be taken in the quest for alpha. One of the key dangers when building alpha models is the temptation to overfit the data, to then "discover" spurious relationships which don't persist in real time. A number of papers discuss backtesting strategies, model risk, and how to spot backtest overfitting. Other themes explored include behavioral finance, market timing, tactical asset allocation (TAA), equity valuation, investor sentiment and alternative beta strategies. Use the search facility to find what you're looking for.
  • AQR Capital Management

    Fact, Fiction and Momentum Investing (AQR Capital, 2014)

    Authored by Cliff Asness and others from AQR Capital, this paper examines the "myths" surrounding momentum investing, using results from a variety of academic studies. The paper aims to clarify the facts with regard to the efficacy of trend-following strategies and to document the practical value of momentum within the investment process.

  • QMA (Quantitative Management Associates)

    Start of Something Big: Demystifying the Source of Large Alpha in Small Caps (QMA)

    In a world where alpha can seem scarce, active small-cap managers continue to outperform their benchmarks in an impressive way. But why? Investors have a general sense small caps are riskier and less efficient, but how these characteristics contribute to more alpha opportunities remains unclear. At QMA, we think it’s critical to understand the sources of returns so that you ...

  • The Trend is Our Friend: Risk Parity, Momentum and Trend Following in Global Asset Allocation (2014)

    The authors of this paper examine the effects of trend application methodologies when applied to global asset allocations amongst commodities, bonds and real estate. Trend following application offers a significant improvement, in comparison to traditional buy-and-hold portfolios, to risk-adjusted performance. It is also a method of asset allocation superior to risk parity. A ...

    • Quantitative
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  • Robeco

    Three ways to successfully implement factors and smart beta (Robeco, 2017)

    Smart beta, which has its roots in factor investing, is enjoying growing popularity. But investors often struggle with how best to implement these strategies. We aim to provide a clearer picture of what factor-based investing actually is and suggest three ways in which investors can implement quantitative strategies. Read also:

    • Quantitative
    • Views: 1021
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  • Invesco (Europe)

    Invesco Global Factor Investing Study 2016

    Our factor investing study explores the growth of factor investing via in-depth face-to-face interviews with chief investment officers, strategy unit executives and factor specialists at 66 leading global institutional investors, asset consultants and private banks. We spoke with investors that were leading the way when it came to factor investing as well as ‘non-users’ ...

  • Royal London Asset Management

    Securitised Bonds: Finding Security in Bond Markets (RLAM, 2017)

    Secured (or securitised) bonds still carry the stigma of the 2008 financial crisis. But stigma often spells opportunity, and the fixed income specialists at RLAM argue that this asset class offers great value for managers who are prepared to get to grips with the documentation underlying individual securities. Not everyone is prepared to do this research, and as a result secured ...

  • CFA Institute Research Foundation

    Technical Analysis: Modern Perspectives (CFA Institute Research Foundation/Market Technicians Association)

    Supply and demand are cornerstones of economics and the interaction of these forces is believed to explain price changes in all freely traded markets. Scarcity tends to result in increased prices and abundance generally leads to lower prices. In financial markets, technical analysis provides a framework for informing investment management decisions by applying a supply and demand ...

  • Robeco

    Concerns regarding the new Fama-French 5-factor model (Robeco)

    Nobel prize laureate Eugene Fama and fellow researcher Kenneth French have revamped their famous 3-factor model by adding two new factors to analyze stock returns: Profitability and Investment. But this 5-factor model raises many questions.

    Speed read

    • The 5-factor model still ignores Momentum and Low Volatility
    • It is unlikely to lead to academic ...

    • Quantitative
    • Views: 1371
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  • S&P Dow Jones Indices

    A Case for Dividend Growth Strategies (S&P Dow Jones Indices)

    Dividend strategies have gained a foothold with market participants seeking potential outperformance and attractive yields, especially in the low-rate environment since the 2008 financial crisis. While traditional high dividend payers have performed strongly in recent years, they have become quite expensive by most valuation metrics. The previous low-interest-rate environment paved ...

  • FTSE Russell

    Capturing the Chinese A-shares and H-shares Anomaly (FTSE Russell, 2016)

    The Chinese equity market is composed of a domestic and an offshore market. The existence of the domestic A-share and the offshore H-share markets provides a choice for a Chinese company to choose its listing venue where the stock could be dually-listed on both markets. As the restrictions to invest in the China market are easing, investors are looking for a variety of tools to ...

  • QMA (Quantitative Management Associates)

    The Long and the Short of It: The Quant Shorting Advantage (QMA, 2016)

    Active extension, equity long-short, and equity market neutral products can be attractive for investors at any particular time, given investors' varied investment objectives and needs. That said, each of the three categories of shorting-enabled products can help address distinct issues facing investors today. QMA’s paper describes how short selling can allow investors to ...

  • AQR Capital Management

    The Siren Song of Factor Timing (Cliff Asness, 2016)

    Can investors time markets - or factors? Is it worth trying? Passive factor investing is usually implemented on a fee scale somewhere in-between the normal levels for active and traditional passive management. But factor timing creates the potential for skill-based alpha, which justifies higher fees.

    Back in February, Rob Arnott wrote a paper, “How Can ‘Smart ...

  • FTSE Russell

    Multifactor Indexes: The Power of Tilting (FTSE Russell, 2016)

    In recent years, institutional investors have become increasingly convinced of the benefits of factor investing, facilitated by the creation of a variety of indices, each focusing on a specific risk factor. The creation of these new indexes has allowed investors to access factor exposure efficiently and at low cost. However, as with any investment strategy, the return from a ...

  • 101 Formulaic Alphas

    The authors of this Dec 2015 paper present explicit formulas (including computer code) for 101 real life quant trading alphas. They examine the results, detailing also the average holding period, and examining the dependence of these alphas upon volatility and turnover.

  • FTSE Russell

    Smart beta: 2017 global survey findings from asset owners (FTSE Russell, 2017)

    Now in its fourth year, FTSE Russell’s comprehensive survey of global asset owners focuses on key themes behind the adoption, evaluation and implementation of smart beta. Find out the primary motivations of asset owners from across all asset tiers and regions, and get insight into how they perceive and participate in growing trends such as smart sustainability and ...

  • FTSE Russell

    Factor Exposure and Portfolio Concentration (FTSE Russell, May 2017)

    Get an in-depth view of efficient multi-factor portfolio construction techniques, review the pros and cons of various approaches, and take a closer look at the benefits of tilting toward and away from single and multiple factors. An ideal read for asset owners who need a better understanding of factor tilting and want to compare outcomes for factor portfolio construction by looking ...

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