Victim of Technology
I'm reading "Glasshouse", a fine cyber SF book by Charles Stross that has far future historians looking back on the mid 20th to 21st centuries as a "dark age", since all records became digital and vanished in a maze of obsolete incompatible technologies.
We don't have to wait for the 25th century to share the love on this. I confidently loaded up a USB key with fancy moving slides and videos in two flavors for a QWAFAFEW* talk in San Francisco. In moving from a mac to the windows laptop, everything went dark except the pdf version of the slides.
Simulation of a News Driven Portfolio
The talk was:
There are two information revolutions underway in trading and investing. Most of the headlines focus on structured quantitative market information at ever higher frequencies. The other technology revolution in trading and investing is driven by qualitative, textual and relationship information. This is important for people who make their living in finance on scales longer than microseconds, even days.
What constitutes “news” is a moving target, as vendors and investors expand and automate collection from primary and proprietary sources, including social media. This is increasingly used for event driven alpha signals. Demonstrations of this using commercial “state of the practice” news systems from Thomson Reuters are a part of this talk. A model sequestered for nearly a year and simulated, with trading costs, on unseen price and news produced an alpha exceeding 11% over its unseen test period, the first three quarters of 2010.
This last point, of putting the model in "cold storage" and then testing on unseen data would be a good standard for all papers of this sort, many of which appear (along with ours in the Winter 2011 issue) of the Journal of Portfolio Management. Alas, application of this rule would require a name change to the Pamphlet of Portfolio Management.
The Missing Movies
The movies were for an Event Study Explorer, a visual, interactive "quantextual" model building tool used to find alpha in news and other sources. Without the videos, I broke a few moves pointing to the still slides and pretending to fill in the motion. That worked poorly, so I am posting the four small movie segments on the Event Study Explorer, built in Spotfire, here. It addresses many of the (valid) critiques of event studies. The narration is by my collaborator and coauthor, Jacob Sisk, of Thomson Reuters.
The movies, in four segments, follow the still picture below.
All of this is available for test drives, contact Rich Brown at Thomson Reuters News Analtyics. (firstname.lastname@example.org)
*QWAFAFEW is the torturously arrived at name for a group of quants & Wall Street nerds who wanted to have tech talks with beer and snacks. It started in NY in the 80s and has thrived, meeting more or less monthly in nine cities.