16 Feb
General

Robust Rolling Regime Detection (R2-RD): A Data-Driven Perspective of Financial Markets

The nonstationary and high-dimensional nature of financial markets poses significant challenges for navigation. Temporally stable regime classification offers a perspective to manage these challenges. We propose the Robust Rolling Regime Detection (R2-RD) framework that adaptively retrains with streaming data and employs temporal ensemble, label assignment, and threshold policies to address temporal instability resulting from nonstationarity, model mismatches, etc.  Since a learning-based model is only as powerful as the data it trains on, the more stable results of the R2-RD make it a better candidate for usage across AI-based applications.

Continue reading

16 Feb
General

Robust Rolling K-Means (R2K-Means): an Updateable Nonlinear K-Means Clustering Methodology for Financial Time Series

K-Means is a popular clustering algorithm designed to group data points into k clusters. In the financial industry, grouping funds or assets can isolate behaviors and define investment universes using any number of  performance measures, holdings, or alternative features. Standard K-Means clustering at each time increment creates extremely unstable results due to the effects of random initialization and cluster mislabeling. Robust Rolling K-Means (R2K-Means) is the extension of K-Means to time series allowing investors to dynamically track and group funds in a stable and updateable framework.  Since a learning-based model is only as powerful as...

Continue reading

15 Sep
ML/DL Journey

Mutual Funds – Historic Analysis: US Small Cap

Small cap mirage - running 16,500 investment strategy combinations over 20 years highlights the delusion of leveraging basic historical analysis for selecting small cap funds that consistently beat the index! Note that 20% of the funds reclassified themselves (some more than 4 times), there is marginal prediction power in performance measures (less than 1 in 5 chances), performance has struggled to beat the Russell 2000, Covid literally flipped the signals and yet, over the last decade the US Small Cap mutual fund market grew 2.5x!  For the US Small Cap mutual fund market, assuming the Russell...

Continue reading

01 May
ML/DL Journey

US Mid Caps – Historic Analysis: Are you always wrong?

$816 billion invested and you are lucky if you get what you think you are buying!  43% of the funds have reclassified themselves (some more than 4 times), there is marginal prediction power in performance measures (less than 1 in 5 chances), performance has struggled to beat the Russell Mid Cap TR USD and yet, over the last decade the US Mid Cap mutual fund market grew 2.5x!   Overall, for the US Mid Cap mutual fund market, assuming the Russell Mid Cap TR USD as the index, there may be lesser value in looking at historical price...

Continue reading