This book is a study of the process of finding alphas. The material is presented as a collection of essays, providing diverse viewpoints from successful quants on the front lines of quantitative trading.
A wide variety of topics is covered, ranging from theories about the existence of alphas, to the more concrete and technical aspects of alpha creation.
Part I presents a general introduction to alpha creation, and is followed by a brief account of the alpha life-cycle, and insights on cutting losses.
Part II focuses more on the technical side of alpha design, such as the dos and don'ts of information research, key steps to developing an alpha, and the evaluation and improvement of quality alphas. The key technical aspects discussed in this section are turnover, backtesting, fundamental analysis, equity price volume, statistical arbitrage, overfitting, and alpha diversity.
Part III explores ad hoc topics in alpha design, including alpha design for various asset classes like futures and currencies, the development of momentum alphas, and the effect of news and social media on stock returns.
In Part IV, we introduce you to WebSim™, a web-based alpha development tool. We invite all quant enthusiasts to utilize this free tool to learn about alpha backtesting (also known as alpha simulation), and ultimately to create their own alphas.
Finally, in Part V, we present an inspirational essay for all quants who are ready to explore the world of quantitative trading.