Quant Blogosphere Herding
It’s interesting to watch the herding in the quantitative blogosphere over time (and I’m just as guilty as most).
In 2008, when I first started blogging, it was hard to find anyone not talking about RSI(2), DV(2), or some other whiz bang indicator that measured short-term mean-reversion. That inefficiency dried up and so did the subject.
Today, the topic du jour is strategies of the longer-term variety: trend-following and momentum, tactical asset allocation, risk parity, volatility premiums, permanent portfolios, market valuation models, etc.
I assume that’s partially a result of the market closing a lot of the short-term plays we quantitative types were profiting from, and partially a result of these longer-term approaches doing such a good job of timing the two big bear markets of the new millennia.
Of course, there are deviants from the herd.
I’ve focused a lot of energy on volatility trading strategies (along with VIX & More, Six Figure, Only VIX, etc.), seasonality plays always get some ink (although I’m less and less inclined to pay them much heed), and Rob Hanna has been doing good things analyzing the overnight market, just to name a few.
But generally speaking, we quantitative-types herd.
I just can’t help wondering, where is the herd going next?
Those longer-term strategies are great for what they’re intended for: long-term investing, but they fail to produce the oversized return stream today that most of us are chasing.
And we’re all effectively cut out of the HFT game, so despite that being Wall Street’s play du jour, we have to take that off the table.
For a number of reasons (but mostly because of the asymmetric risk/return tradeoff resulting from the VIX futures term structure) I’ve planted my flag on trading volatility, but that’s by no means the only answer.
To the other quantitative minds out there: where are you planting your flag? What’s your next big quantitative play? And how are you breaking from the herd?
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