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Finding Alphas: A Quantitative Approach to Building Trading Strategies


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Finding Alphas: A Quantitative Approach to Building Trading Strategies

Igor Tulchinsky

ISBN: 978-1-119-05786-4 October 2015 272 Pages


Discover the ins and outs of designing predictive trading models

Drawing on the expertise of WorldQuant’s global network, this new edition of Finding Alphas: A Quantitative Approach to Building Trading Strategies contains significant changes and updates to the original material, with new and updated data and examples.

Nine chapters have been added about alphas – models used to make predictions regarding the prices of financial instruments. The new chapters cover topics including alpha correlation, controlling biases, exchange-traded funds, event-driven investing, index alphas, intraday data in alpha research, intraday trading, machine learning, and the triple axis plan for identifying alphas. You’ll also find details of how to use WebSim, WorldQuant’s web-based simulation platform, to test your alphas.

•    Provides more references to the academic literature

•    Includes new, high-quality material

•    Organizes content in a practical and easy-to-follow manner

•    Adds new alpha examples with formulas and explanations

If you’re looking for the latest information on building trading strategies from a quantitative approach, this book has you covered. 

Preface xi

Acknowledgments xiii

About the WebSim? Website xv

Part I Introduction 1

1 Introduction to Alpha Design 3

By Igor Tulchinsky

2 Alpha Genesis Life-Cycle of a Quantitative

Model Financial Price Prediction 7

By Geoffrey Lauprete

3 Cutting Losses 13

By Igor Tulchinsky

Part II Design and Evaluation 19

4 Alpha Design 21

By Scott Bender/Yongfeng He

5 How to Develop an Alpha. I: Logic with an Example 27

By Pankaj Bakliwal

6 How to Develop an Alpha. II: A Case Study 31

By Hongzhi Chen

7 Fundamental Analysis 43

By Xinye Tang/Kailin Qi

8 Equity Price and Volume 49

By Cong Li

9 Turnover 51

By Pratik Patel

10 Backtest ? Signal or Overfitting 55

By Peng Yan

11 Alpha and Risk Factors 61

By Peng Wan

12 The Relationship between Alpha and Portfolio Risk 65

By Ionut Aron

13 Risk and Drawdowns 71

By Hammad Khan

14 Data and Alpha Design 79

By Weijia Li

15 Statistical Arbitrage, Overfitting, and Alpha Diversity 85

By Zhuangxi Fang

16 Techniques for Improving the Robustness of Alphas 89

By Michael Kozlov

17 Alphas from Automated Search 93

By Yu Huang

18 Algorithms and Special Techniques in Alpha Research 97

By Sunny Mahajan

Part III Extended Topics 101

19 Impact of News and Social Media on Stock Returns 103

By Wancheng Zhang

20 Stock Returns Information from the Stock Options Market 109

By Swastik Tiwari

21 Introduction to Momentum Alphas 117

By Zhiyu Ma

22 Financial Statement Analysis 119

By Paul A. Griffin

23 Institutional Research 101 127

By Benjamin Ee

24 Introduction to Futures Trading 145

By Rohit Agarwal

25 Alpha on Currency Forwards and Futures 151

By Richard Williams

Part IV New Horizon WebSim 155

26 Introduction to WebSim 157

By Jeffrey Scott

27 Alphas and WebSim Fundamentals 165

28 Understanding How WebSim Works 169

29 API Reference 179

30 Interpreting Results and Alpha Repository 187

31 Alpha Tutorials 199

32 FAQs 211

33 Suggested Reading 223

Part V - A Final Word 229

34 The Seven Habits of Highly Successful Quants 231

By Richard Hu

References 235

Index 245