Blogs

Betting with a Moving Kelly Ratio

The Kelly ratio gives the optimal percentage of an investor’s wealth to bet in order to maximize his long term growth rate. It was originally developed for betting with known odds and win ratios, for games such as blackjack and horse betting. However, it has its uses in investments as well. For a stock instrument, [...]

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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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Random Walks

Introduction The random walk hypothesis states that stock market prices evolve according to a stochastic process, preventing the prediction of future stock market movements.  The concept follows from the weak version of the efficient-market hypothesis, which asserts that future stock market movements are not correlated with past movements.  In other words, the movement of share [...]

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Turtle Breakout Trading Strategy Simulation

Introduction The “turtles” are a group of traders in the 1980's formed by Richard Dennis and William Eckhardt to study whether trading ability is determined by nature or nurture. The group’s story is covered in many books such as Market Wizards by Jack D. Schwager, Way of the Turtle by Curtis Faith (an original turtle), [...]

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Tracking Analyst Optimism in Palantir Finance

We examine an interesting study recently published in the April 2010 McKinsey Quarterly.  The study can be found here (registration required), and the results are further discussed here.  This study examines a phenomenon known as “optimism bias” – the tendency of analysts predicting company performance to over-estimate how well a company will perform.   Analysts are [...]

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Automating Portfolio Analysis in Palantir

In this video we show how to carry out performance attribution analysis on portfolios created in Palantir, and how this analysis can be automated using Hedgehog, the Palantir Finance programming language. This video is best viewed in full-screen mode. If you have trouble viewing the embedded video, you can download a copy here.

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