Publications by Ilya Kipnis
Last Post For A While, And Two Premium (Cheap) Databases
This will be my last post on this blog for an indefinite length of time. I will also include an algorithm to query Quandl’s SCF database, which is an update on my attempt to use free futures data from Quandl’s CHRIS database, which suffered from data integrity issues, even after attempts to clean it. Also provided is a small tutorial on using...
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I’m Back, A New Harry Long Strategy, And Plans For Hypothesis-Driven Development
I’m back. Anyone that wants to know “what happened at Graham”, I felt there was very little scaffolding/on-boarding, and Graham’s expectations/requirements changed, though I have a reference from one of the quantitative directors. In any case, moving on. Harry Long recently came out with a new strategy posted on SeekingAlpha, and I’d li...
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Introduction to Hypothesis Driven Development — Overview of a Simple Strategy and Indicator Hypotheses
This post will begin to apply a hypothesis-driven development framework (that is, the framework written by Brian Peterson on how to do strategy construction correctly, found here) to a strategy I’ve come across on SeekingAlpha. Namely, Cliff Smith posted about a conservative bond rotation strategy, which makes use of short-term treasuries, long...
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Hypothesis-Driven Development Part II
This post will evaluate signals based on the rank regression hypotheses covered in the last post. The last time around, we saw that rank regression had a very statistically significant result. Therefore, the next step would be to evaluate the basic signals — whether or not there is statistical significance in the actual evaluation of the signal...
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Hypothesis Driven Development Part III: Monte Carlo In Asset Allocation Tests
This post will show how to use Monte Carlo to test for signal intelligence. Although I had rejected this strategy in the last post, I was asked to do a monte-carlo analysis of a thousand random portfolios to see how the various signal processes performed against said distribution. Essentially, the process is quite simple: as I’m selecting one a...
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Hypothesis Driven Development Part IV: Testing The Barroso/Santa Clara Rule
This post will deal with applying the constant-volatility procedure written about by Barroso and Santa Clara in their paper “Momentum Has Its Moments”. The last two posts dealt with evaluating the intelligence of the signal-generation process. While the strategy showed itself to be marginally better than randomly tossing darts against a dartb...
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Hypothesis-Driven Development Part V: Stop-Loss, Deflating Sharpes, and Out-of-Sample
This post will demonstrate a stop-loss rule inspired by Andrew Lo’s paper “when do stop-loss rules stop losses”? Furthermore, it will demonstrate how to deflate a Sharpe ratio to account for the total number of trials conducted, which is presented in a paper written by David H. Bailey and Marcos Lopez De Prado. Lastly, the strategy will be ...
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Volatility Stat-Arb Shenanigans
This post deals with an impossible-to-implement statistical arbitrage strategy using VXX and XIV. The strategy is simple: if the average daily return of VXX and XIV was positive, short both of them at the close. This strategy makes two assumptions of varying dubiousness: that one can “observe the close and act on the close”, and that one can ...
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How well can you scale your strategy?
This post will deal with a quick, finger in the air way of seeing how well a strategy scales–namely, how sensitive it is to latency between signal and execution, using a simple volatility trading strategy as an example. The signal will be the VIX/VXV ratio trading VXX and XIV, an idea I got from Volatility Made Simple’s amazing blog, particul...
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A Filter Selection Method Inspired From Statistics
This post will demonstrate a method to create an ensemble filter based on a trade-off between smoothness and responsiveness, two properties looked for in a filter. An ideal filter would both be responsive to price action so as to not hold incorrect positions, while also be smooth, so as to not incur false signals and unnecessary transaction costs...
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