Best practices in research for quantitative equity strategies

Reference: BEST PRACTICES IN RESEARCH FOR QUANTITATIVE EQUITY STRATEGIES

Taxonomy is simply a classification of something.

  • Strategies differ in their motivation to trade, information used to trade,and the instrunments traded.
  • Metrics such as: trading frequencies, and holding periods are functions of the investment theory underlying the strategy.
  1. Multifactor strategies: Models which invest in equities based on multiple characteristics that replicate how investors make decisions.
  2. Allocation strategies: Strategies which make decisions based on allocations to different variables eg. Factor timing, sectors, regime switching etc.
  3. Stock specific strategies: Strategies which focus on information available to a specific individual security.
  4. Event studies: Strategies which generate alpha from certain market events,such as M&A, Earnings announcements.
  5. Market micro-structure strategies: Strats which exploit profitable opportunities arising from trading flows and dynamics of the equity markets.
  6. Stat-Arb: Strategies which exploit systematic relationships among equity securities with similar characteristics.
  7. Textual strats: Quant strats based on qualitative textual signals, such as news reports, internet sentiment on social media.
  8. Macro-strategies: Strats which trade baskets of securities based on broad themes in the economic environment, tech, demography etc.

Properties of good quantitative models Link to heading