Blogs

Backtesting Value and Momentum Factors

We use Palantir’s Factor Builder and Factor Tester applications to construct and backtest Value and Momentum strategies, in the spirit of Cliff Asness’ 1997 article in the Financial Analysts Journal, “The Interaction Between Value and Momentum Strategies.” Value and Momentum are of interest because they each have power to predict the cross-section of stock returns [...]

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Researching Pairs Trades Using Regression

Pairs trading is a popular strategy used by many asset management firms where the firm goes long one security, and short another.  In this video, we will use Palantir to analyze a strategy of trading one gold ETF off of another (GLD and GDX).   GLD is the ETF that tracks the spot price of [...]

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Option Volume and Stock Prices

A 2003 paper by Pan and Poteshman entitled The Information in Option Volume for Stock Prices (found here), and highlighted by this 2006 New York Times article suggests that events in equity options markets can serve as predictors for trends in the stock market.  Their fundamental claims are two-fold:  first, that options traders are better [...]

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Beta Dispersion in Joyride

A few months ago, we launched a trial version of Palantir Finance available to the general public.  We call it Joyride.  If you haven’t tried it yet, you can access it at http://joyride.pfinance.com.  For this particular blog post, we’ve created it entirely using the data available on Joyride (courtesy of Xignite), so we encourage you [...]

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Reverse Stock Splits

A recent Motley Fool article discusses reverse stock splits and their implications for future performance: “Investors have to wonder:  Will reverse splits do any good, or are they basically the kiss of death for a company?”  With Palantir Finance, we can easily examine the short-term performance of companies that undergo reverse stock splits.  This question [...]

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Using the VIX as a Market Signal

The Chicago Board Options Exchange Volatility Index, or VIX, is often cited as a market-timing indicator.  Traders have created a variety of strategies to exploit supposed correlations between this “fear index” and future market returns.  Using Palantir Finance, we can effortlessly examine the exact nature of these correlations to make more informed trading decisions.  The [...]

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Looking to the Future: Forward Earnings Data

Palantir Finance gives us the ability to look at large amunts of data with ease, a trait which lends itself to looking at the millions of corporate earnings estimates at once.   We can use these to determine how bullish/bearish the forecasts are, when companies surprise by beating the estimates, and how the market looks [...]

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The Fed Model

In this post, we will describe an equity trading strategy called the “Fed Model”.  The Fed Model refers to a method of evaluating equity markets versus fixed income markets, which claims that earnings yield of the S&P 500 (predicted forward earnings divided by the current price) can be compared to the yield of the 10-year [...]

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Merton Model

This study explores an equity-factor based strategy that uses the spread between the Merton model equity implied credit spread and the five year CDS across names in the S&P500 index. It trades with the assumption that recently the credit markets are more accurately priced than the equity markets; therefore, a company with a CDS spread [...]

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Pairs Trading Strategy

In this study we explore a trading strategy that isolates pairs of instruments within a sector that are highly correlated. We enter a trade if the price paths of these instruments diverge, going long one instrument and short the other, with the assumption that their price paths will converge. We construct our strategy in four [...]

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