Finding Alphas seeks to teach you how to do one thing and do it well: design alphas. Written by experienced practitioners from WorldQuant, including its founder and CEO Igor Tulchinsky, this book provides detailed insight into the alchemic art of generating trading signals, and gives you access to the tools you need to practice and explore.
This book is a study of the process of fi nding alphas. The material is presented as a collection of essays, providing diverse viewpoints from successful quants on the front lines of quantitative trading.A wide variety of topics is covered, ranging from theories about the existence of alphas, to the more concrete and technical aspects of alpha creation.
Part I presents a general introduction to alpha creation, and is fol-lowed by a brief account of the alpha life-cycle, and insights on cutting losses. Part II focuses more on the technical side of alpha design, such as the dos and don’ts of information research, key steps to developing an alpha, and the evaluation and improvement of quality alphas. The key technical aspects discussed in this section are turnover, backtesting, fundamental analysis, equity price volume, statistical arbitrage, overfi t-ting, and alpha diversity.
Part III explores ad hoc topics in alpha design, including alpha design for various asset classes like futures and currencies, the development of momentum alphas, and the effect of news and social media on stock returns. In Part IV, we introduce you to WebSim™, a web-based alpha devel-opment tool. We invite all quant enthusiasts to utilize this free tool to learn about alpha backtesting (also known as alpha simulation), and ultimately to create their own alphas. Finally, in Part V, we present an inspirational essay for all quants who are ready to explore the world of quantitative trading.
- Introduction to Alpha Design
- Alpha Genesis – The Life-Cycle of a Quantitative Model of Financial Price Prediction
- Cutting Losses
- Alpha Design
- How to Develop an Alpha. I: Logic with an Example
- How to Develop an Alpha. II: A Case Study
- Fundamental Analysis
- Equity Price and Volume
- Backtest – Signal or Overfi tting
- Alpha and Risk Factors
- The Relationship between Alpha and Portfolio Risk
- Risk and Drawdowns
- Data and Alpha Design
- Statistical Arbitrage, Overfi tting, and Alpha Diversity
- Techniques for Improving the Robustness of Alphas
- Alphas from Automated Search
- Algorithms and Special Techniques in Alpha Research
- Impact of News and Social Media on Stock Returns
- Stock Returns Information from the Stock Options Market
- Introduction to Momentum Alphas
- Financial Statement Analysis
- Institutional Research 101
- Introduction to Futures Trading
- Alpha on Currency Forwards and Futures
- Introduction to WebSim
- Alphas and WebSim Fundamentals
- Understanding How WebSim Works
- The Seven Habits of Highly Successful Quants