Difference between revisions of "Computational Investing"

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==Lesson 1: So you want to be a hedge fund manager?==
 
==Lesson 1: So you want to be a hedge fund manager?==
 +
 +
*Introduce investing from a hedge fund manager's point of view
 +
 +
Reading: "What Hedge Funds really do", Chapter 2: So you want to be a hedge fund manager?
  
 
==Lesson 2: Market mechanics==
 
==Lesson 2: Market mechanics==
 +
 +
*How exchanges operate
 +
*How orders arrive, are executed
 +
*Buy, sell, market/limit
 +
*Crashes
 +
 +
Reading: "What Hedge Funds really do", Chapter 4: Market - making mechanics
  
 
==Lesson 3: What is a company worth?==
 
==Lesson 3: What is a company worth?==
 +
 +
*Why does it matter?
 +
*Prop: Magic money-making machine
 +
*Mismatch between what a company is worth and how they are valued in the market
 +
*Take into account dollars in the future
 +
 +
Reading: "What Hedge Funds really do", Chapter 5: Introduction to company valuation
  
 
==Lesson 4: The Capital Assets Pricing Model (CAPM)==
 
==Lesson 4: The Capital Assets Pricing Model (CAPM)==
 +
 +
*One of the fundamental discoveries/advances in finance
 +
*To estimate how much a stock will go up or down, multiply market movement with beta for the stock
 +
 +
Reading: "What Hedge Funds really do", Chapter 7: Framework for investing: The Capital Assets Pricing Model (CAPM)
  
 
==Lesson 5: How hedge funds use the CAPM==
 
==Lesson 5: How hedge funds use the CAPM==
 +
 +
*Use CAPM to figure out ratio in which you want to buy/sell stocks, go long/short
 +
*Time scale: Change allocations weekly - monthly
 +
*Potentially applicable to high-frequency trading
  
 
==Lesson 6: Technical Analysis==
 
==Lesson 6: Technical Analysis==
 +
 +
*Ways to generate some sort of forecast about a stock, looking at recent volume and prices
 +
*Contrast this with using fundamental data about a company
 +
*Indicators (like Bollinger Bands)
  
 
==Lesson 7: Dealing with data==
 
==Lesson 7: Dealing with data==
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* Actual & adjusted
 
* Actual & adjusted
 
* Survivor bias
 
* Survivor bias
 +
 +
Reading: "What Hedge Funds really do", Chapter 12: Overcoming data quirks to design trading strategies
  
 
==Lesson 8: Efficient Markets Hypothesis (short)==
 
==Lesson 8: Efficient Markets Hypothesis (short)==
 +
 +
*Hypothesis: What we want to accomplish in this course is impossible!
 +
*Market responds to any piece of information, so we can never predict a stock movement and use that to our advantage
 +
 +
Reading: "What Hedge Funds really do", Chapter 8: The Efficient Market Hypothesis(EMH) - its three versions
  
 
==Lesson 9: The Fundamental Law of active portfolio management==
 
==Lesson 9: The Fundamental Law of active portfolio management==
 +
 +
*Idea 1: Little intelligence about a lot of stocks
 +
*Idea 2: Deep intelligence about a few stocks
 +
 +
Reading: "What Hedge Funds really do", Chapter 9:The fundamental law of active portfolio management
  
 
==Lesson 10: Portfolio optimization and the efficient frontier==
 
==Lesson 10: Portfolio optimization and the efficient frontier==
 +
 +
*Deeper knowledge and philosophy behind portfolio optimization
 +
 +
Reading: "What Hedge Funds really do", Chapter 10: Modern portfolio theory: The efficient frontier and portfolio optimization
 +
 +
 +
==Projects==
 +
 +
02-P1
 +
Build a market simulator
 +
 +
http://wiki.quantsoftware.org/index.php?title=CompInvesti_Homework_3
 +
 +
Create simulator server
 +
 +
02-P2
 +
Use an indicator to find where good buy & sell points are (with Technical Analysis lesson)
 +
Invent your own technical indicator
 +
 +
02-P3
 +
Write a strategy that generates orders
 +
Back tester: Test strategy using market simulator
 +
Possible peer feedback opportunity (peers back test your strategy)
 +
 +
http://wiki.quantsoftware.org/index.php?title=CompInvesti_Homework_4
 +
 +
==Exam==
 +
 +
Corresponds to a midterm in the context of the overall course
 +
Some Python questions

Latest revision as of 16:38, 4 August 2015

Lesson 1: So you want to be a hedge fund manager?

  • Introduce investing from a hedge fund manager's point of view

Reading: "What Hedge Funds really do", Chapter 2: So you want to be a hedge fund manager?

Lesson 2: Market mechanics

  • How exchanges operate
  • How orders arrive, are executed
  • Buy, sell, market/limit
  • Crashes

Reading: "What Hedge Funds really do", Chapter 4: Market - making mechanics

Lesson 3: What is a company worth?

  • Why does it matter?
  • Prop: Magic money-making machine
  • Mismatch between what a company is worth and how they are valued in the market
  • Take into account dollars in the future

Reading: "What Hedge Funds really do", Chapter 5: Introduction to company valuation

Lesson 4: The Capital Assets Pricing Model (CAPM)

  • One of the fundamental discoveries/advances in finance
  • To estimate how much a stock will go up or down, multiply market movement with beta for the stock

Reading: "What Hedge Funds really do", Chapter 7: Framework for investing: The Capital Assets Pricing Model (CAPM)

Lesson 5: How hedge funds use the CAPM

  • Use CAPM to figure out ratio in which you want to buy/sell stocks, go long/short
  • Time scale: Change allocations weekly - monthly
  • Potentially applicable to high-frequency trading

Lesson 6: Technical Analysis

  • Ways to generate some sort of forecast about a stock, looking at recent volume and prices
  • Contrast this with using fundamental data about a company
  • Indicators (like Bollinger Bands)

Lesson 7: Dealing with data

  • How data can be bad
  • Actual & adjusted
  • Survivor bias

Reading: "What Hedge Funds really do", Chapter 12: Overcoming data quirks to design trading strategies

Lesson 8: Efficient Markets Hypothesis (short)

  • Hypothesis: What we want to accomplish in this course is impossible!
  • Market responds to any piece of information, so we can never predict a stock movement and use that to our advantage

Reading: "What Hedge Funds really do", Chapter 8: The Efficient Market Hypothesis(EMH) - its three versions

Lesson 9: The Fundamental Law of active portfolio management

  • Idea 1: Little intelligence about a lot of stocks
  • Idea 2: Deep intelligence about a few stocks

Reading: "What Hedge Funds really do", Chapter 9:The fundamental law of active portfolio management

Lesson 10: Portfolio optimization and the efficient frontier

  • Deeper knowledge and philosophy behind portfolio optimization

Reading: "What Hedge Funds really do", Chapter 10: Modern portfolio theory: The efficient frontier and portfolio optimization


Projects

02-P1 Build a market simulator

http://wiki.quantsoftware.org/index.php?title=CompInvesti_Homework_3

Create simulator server

02-P2 Use an indicator to find where good buy & sell points are (with Technical Analysis lesson) Invent your own technical indicator

02-P3 Write a strategy that generates orders Back tester: Test strategy using market simulator Possible peer feedback opportunity (peers back test your strategy)

http://wiki.quantsoftware.org/index.php?title=CompInvesti_Homework_4

Exam

Corresponds to a midterm in the context of the overall course Some Python questions