Finding Alphas, 2nd Edition

Finding Alphas, 2nd Edition

by Igor Tulchinsky
Released October 2019
Publisher(s): Wiley
ISBN: 9781119571216

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Book description

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.

•    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. 

Table of contents

  1. Cover
  2. Preface
  3. Preface (to the Original Edition)
  4. Acknowledgments
    1. DISCLAIMER
  5. About the WebSim Website
    1. WEBSIM RESEARCH CONSULTANTS
  6. PART I: Introduction
    1. 1 Introduction to Alpha Design
      1. DESIGNING ALPHAS BASED ON DATA
      2. DEFINING QUALITY IN ALPHAS
      3. ALPHA CONSTRUCTION, STEP BY STEP
      4. CONCLUSION
    2. 2 Perspectives on Alpha Research
      1. PHDS ON THE STREET
      2. A NEW INDUSTRY
      3. STATISTICAL ARBITRAGE
      4. EXISTENCE OF ALPHAS
      5. IMPLEMENTATION
      6. EVALUATION
      7. LOOKING BACK
      8. THE OPPORTUNITY
    3. 3 Cutting Losses
      1. HOW TO APPLY THE PRINCIPLE OF THE UNRULE TO CUTTING LOSSES
      2. SUMMARY
  7. PART II: Design and Evaluation
    1. 4 Alpha Design
      1. DATA INPUTS TO AN ALPHA
      2. ALPHA UNIVERSE
      3. ALPHA PREDICTION FREQUENCY
      4. VALUE OF AN ALPHA
      5. PRACTICAL ALPHA EVALUATION
      6. FUTURE PERFORMANCE
      7. CONCLUSION
    2. 5 How to Develop an Alpha: A Case Study
      1. CONCLUSION
      2. NOTE
    3. 6 Data and Alpha Design
      1. HOW WE FIND DATA FOR ALPHAS
      2. DATA VALIDATION
      3. UNDERSTAND THE DATA BEFORE USING IT
      4. EMBRACE THE BIG DATA ERA
      5. CONCLUSION
    4. 7 Turnover
      1. ALPHA HORIZON
      2. THE COST OF A TRADE
      3. THE CROSSING EFFECT
      4. CONTROLLING TURNOVER
      5. EXAMPLES
      6. TUNING THE TURNOVER
      7. NOTE
    5. 8 Alpha Correlation
      1. ALPHA PnL CORRELATION
      2. ALPHA VALUE CORRELATION
      3. CORRELATION WITH ALPHA POOL
      4. CONCLUSION
    6. 9 Backtest – Signal or Overfitting?
      1. INTRODUCTION
      2. STATISTICAL ARBITRAGE
      3. BACKTESTING
      4. OVERFITTING
      5. HOW TO AVOID OVERFITTING
      6. CONCLUSION
    7. 10 Controlling Biases
      1. INTRODUCTION
      2. CATEGORIES OF BIAS
      3. SYSTEMATIC BIASES
      4. BEHAVIORAL BIASES
      5. CONCLUSION
    8. 11 The Triple-Axis Plan
      1. THE TAP
      2. IMPLEMENTING TAP
      3. CONCLUSION
    9. 12 Techniques for Improving the Robustness of Alphas
      1. INTRODUCTION
      2. METHODS FOR ROBUSTNESS IMPROVEMENT
      3. CONCLUSION
    10. 13 Alpha and Risk Factors
    11. 14 Risk and Drawdowns
      1. ESTIMATING RISKS
      2. DRAWDOWNS
      3. CONTROLLING RISKS
      4. CONCLUSION
    12. 15 Alphas from Automated Search
      1. EFFICIENCY AND SCALE
      2. INPUT DATA SHOULD NOT COME FROM TOO MANY CATEGORIES
      3. INPUT DATA AND UNITLESS RATIOS
      4. UNNECESSARY SEARCH SPACE
      5. INTERMEDIATE VARIABLES
      6. SEAS OF ALPHAS, NOT SINGLE ALPHAS
      7. SIMPLE ALPHAS
      8. LONGER BACKTESTING PERIODS
      9. ALPHA BATCH, NOT SINGLE ALPHA PERFORMANCE
      10. DIVERSIFY THE ALPHA BATCH
      11. SENSITIVITY TESTS AND SIGNIFICANCE TESTS
      12. MANUAL ALPHA SEARCH
      13. CONCLUSION
    13. 16 Machine Learning in Alpha Research
      1. INTRODUCTION
      2. MACHINE LEARNING METHODS
      3. CONCLUSION
    14. 17 Thinking in Algorithms
      1. DIGITAL FILTERS
      2. OPTIMIZATION AND LOSS FUNCTION DESIGN
      3. THE BIAS–VARIANCE TRADE-OFF
      4. DIMENSIONALITY REDUCTION
      5. SHRINKAGE ESTIMATORS
      6. PARAMETER OPTIMIZATION
      7. CONCLUSION
  8. PART III: Extended Topics
    1. 18 Equity Price and Volume
      1. INTRODUCTION
      2. SEEKING PROFITS THROUGH PRICE AND VOLUME
      3. CONCLUSION
    2. 19 Financial Statement Analysis
      1. BASICS
      2. THE BALANCE SHEET
      3. THE INCOME STATEMENT
      4. THE CASH FLOW STATEMENT
      5. GROWTH
      6. CORPORATE GOVERNANCE
      7. NEGATIVE FACTORS
      8. SPECIAL CONSIDERATIONS
      9. FACTORS AS SCREENS
      10. CONVERTING FACTORS TO ALPHAS
      11. CONCLUSION
    3. 20 Fundamental Analysis and Alpha Research
      1. FINANCIAL STATEMENTS
      2. FINANCIAL STATEMENT ANALYSIS
      3. CONCLUSION
    4. 21 Introduction to Momentum Alphas
      1. CONCLUSION
    5. 22 The Impact of News and Social Media on Stock Returns
      1. INTRODUCTION
      2. NEWS IN ALPHAS
      3. ACADEMIC RESEARCH
      4. SENTIMENT
      5. NOVELTY
      6. RELEVANCE
      7. NEWS CATEGORIES
      8. EXPECTED AND UNEXPECTED NEWS
      9. HEADLINES AND FULL TEXT
      10. NO NEWS IS GOOD NEWS?
      11. NEWS MOMENTUM
      12. SOCIAL MEDIA
      13. CONCLUSION
    6. 23 Stock Returns Information from the Stock Options Market
      1. INTRODUCTION
      2. VOLATILITY SKEW
      3. VOLATILITY SPREAD
      4. OPTIONS TRADING VOLUME
      5. OPTION OPEN INTEREST
      6. CONCLUSION
      7. NOTE
    7. 24 Institutional Research 101: Analyst Reports
      1. ACCESSING ANALYST RESEARCH (FOR FREE, OF COURSE)
      2. SO FAR, SO GOOD. BUT WHY SHOULD YOU CARE?
      3. THINGS TO WATCH OUT FOR IN READING ANALYST REPORTS
      4. WHY DO STOCK ANALYSTS TALK TO THE FINANCIAL MEDIA?
      5. CONCLUSION
      6. NOTES
    8. 25 Event-Driven Investing
      1. INTRODUCTION
      2. MERGER ARBITRAGE
      3. SPIN-OFFS, SPLIT-OFFS, AND CARVE-OUTS
      4. DISTRESSED-ASSET INVESTING
      5. INDEX-REBALANCING ARBITRAGE
      6. CAPITAL STRUCTURE ARBITRAGE
      7. CONCLUSION
    9. 26 Intraday Data in Alpha Research
      1. DATA IN MARKET MICROSTRUCTURE
      2. THE ILLIQUIDITY PREMIUM IN ASSET PRICES
      3. MARKET MICROSTRUCTURE AND EXPECTED RETURNS
      4. CONCLUSION
    10. 27 Intraday Trading
      1. DAILY TRADING VERSUS INTRADAY TRADING
      2. DIFFERENT TYPES OF INTRADAY ALPHAS
      3. MAKING AN INTRADAY ALPHA
      4. CONCLUSION
    11. 28 Finding an Index Alpha
      1. INDEX ARBITRAGE IN PRACTICE
      2. MARKET IMPACT FROM INDEX CHANGES
      3. OTHER INDEX ANOMALIES
      4. CONCLUSION
    12. 29 ETFs and Alpha Research
      1. MERITS OF INVESTING IN ETFS
      2. RISKS BEHIND THESE INSTRUMENTS
      3. ALPHA OPPORTUNITIES
      4. CHALLENGES IN ETF ALPHA RESEARCH
      5. CONCLUSION
    13. 30 Finding Alphas on Futures and Forwards
      1. KEY MARKET FEATURES
      2. UNDERLYING FACTOR EXPOSURE
      3. CONSEQUENCES OF INSTRUMENT GROUPING
      4. BASIC CHECKLIST FOR ALPHA TESTING
      5. CONCLUSION
  9. PART IV: New Horizon – WebSim
    1. 31 Introduction to WebSim
      1. INTRODUCTION
      2. WHY WEBSIM WAS DEVELOPED
      3. HOW WEBSIM IS USED GLOBALLY
      4. WHO USES WEBSIM
      5. WHERE ALPHA IDEAS COME FROM
      6. SAMPLE DATA TYPES
      7. CREATING AN ALPHA
      8. MANAGING SIMULATION SETTINGS
      9. ANALYZING RESULTS
      10. AN ALPHA EXAMPLE
      11. CONCLUSION
      12. NOTE
  10. PART V: A Final Word
    1. 32 The Seven Habits of Highly Successful Quants
      1. 1. WORK HARD WITHOUT EVEN REALIZING IT
      2. 2. SET AMBITIOUS LONG-TERM TARGETS BUT ATTAINABLE WEEKLY GOALS
      3. 3. PRIORITIZE BASED ON RISK AND REWARD
      4. 4. STAY CURIOUS
      5. 5. PERFORM VALUE-ADDED WORK – AND AUTOMATE, AUTOMATE, AUTOMATE
      6. 6. MAKE SENSIBLE CHANGES, AND BEWARE OF OVERFITTING
      7. 7. FORM SYNERGISTIC TEAMS
  11. References
    1. JOURNAL ARTICLES (PRINTED)
    2. JOURNAL ARTICLES (ELECTRONIC/ONLINE)
    3. BOOKS
    4. UNPUBLISHED MANUSCRIPTS/WORKING PAPER SERIES
    5. WEBSITES
    6. PUBLIC REPORTS
  12. Index
  13. End User License Agreement

Product information

  • Title: Finding Alphas, 2nd Edition
  • Author(s): Igor Tulchinsky
  • Release date: October 2019
  • Publisher(s): Wiley
  • ISBN: 9781119571216