1 – MV 03 Transition To Project 01 V1

Congratulations on getting through your first batch of lessons. Next on your agenda is your first project, trading with momentum, where you’ll implement a momentum trading strategy and perform a statistical test to conclude if there’s alpha in the signal. That sounds like a really interesting project. Does a bode on the learning we’ve been … Read more

7 – MV 13 Global Talent Is Equally Distributed V1

We believe that the community of students who are taking this nanodegree are doing more than just getting themselves ready to enter the quant trading industry. You and your community of classmates are helping us to prove that talent exists in every corner of the world. I have to admit that from the outside of … Read more

6 – M1L6 12 Finding Alpha V1

Formulating trading strategies often starts with an observation. A pattern that seems to be recurring in the market over time. At that point, your creativity and intuition tell you that there might be an opportunity for monetization. Your job as a contrator then, is to turn this observation into an expression, both mathematically and programmatically … Read more

5 – M1L6 09 Statistical Analysis V10

Now we are ready to perform our analysis. The resulting returns time series is the theoretical monthly performance of our long-short portfolio. Our goal is to see if the mean monthly return is greater than zero. Let’s calculate that. So, our mean is indeed greater than zero at 0.53 percent, but does this mean that … Read more

4 – M1L6 06 Trading Strategy V2

Here’s how you might approach the problem of formulating the complete trading strategy. Our goal is to construct a stock portfolio of long and short positions, and the selection process for stocks to go into the portfolio is based on the stock’s returns performance relative to other stocks. For this example, we shall assume we … Read more

3 – M1L6 04 Long And Short Positions V3

Once you have found a signal that seems to indicate the future performance of a stock, it is time to put it to action. For instance, if you think that a stock has upward momentum, you might want to buy some shares and hold onto it for a fixed period of time, or until you … Read more

2 – M1L6 02 Momentumbased Signals V4

Newton’s first law of motion states that an object at rest stays at rest, and an object in motion stays in motion with the same speed and in the same direction, unless acted upon by an unbalanced force. While Newton’s laws may seem to have little to do with the vagaries of the stock market, … Read more

1 – M1L6 01 Designing A Trading Strategy V4

A trading strategy is a set of steps and rules that help you decide what stocks to buy or sell, when to perform these trades and how much money to invest in them. Designing a successful training strategy that reliably generates profits for you while minimizing the risk of losing money is indeed a complex … Read more

4 – M1L5 06 Distribution Of Stock Prices Part 2 V1

Let’s talk about how a series of daily price values arises. It has to do with our earlier discussion of compounding. Let’s say, a stock starts at P sub zero, and each day the price changes by some small percent, the return. We saw earlier how the price at time T could be written as … Read more

3 – M1L5 03 Log Returns V5

Quantitative analysts frequently work with a quantity related to but slightly different from the raw return, the natural logarithm of return. Remember how the return was defined as P sub t minus P sub t minus one divided by P sub t minus 1. Well, the log return is defined slightly differently, as the natural … Read more

2 – M1L5 02 Returns V6

Say we’re looking at a time series of prices for a stock. The ups and downs are interesting if we’re vaguely curious about how the company is doing. But more likely than not, we’re looking at the price series because we own some of the stock or we’ve invested money in the stock on someone … Read more

1 – M1L5 01 Intro V2

So far, you’ve seen some stock market data and learned about some of the market processes that generate these data, so you’re beginning to see what these long streams of numbers actually mean. As is true of all types of data, stock data represent measurements of things in the real world that have certain properties, … Read more

9 – M1L4 16 Alternate Data V2

Think about all the sources of information we have considered so far, market data, corporate actions, fundamental information, compositional data. This is the standard information that everyone uses, it’s small compared to the amount of data that can affect the market. There is useful information all around you to help you predict the market, information … Read more

8 – M1L4 13 Exchange Traded Funds V4

Let’s take a moment to think about what a trading algorithms goal should be. The obvious part is making money i.e, we should try to generate as much positive returns from trading as possible but the stock market is inherently very unpredictable as we have already seen. One approach is to buy stocks that have … Read more

7 – M1L4 11 Survivor Bias V2

The average return from experiment A is indeed higher than from B. Why is that? It’s due to a phenomenon known as survivor bias or survivorship bias. If you only picked from the stocks that have survived until today, that already filtered out all the other stocks that failed during that period. Another way to … Read more

6 – M1L4 08 Missing Values V5

Up until now, you’ve been treating stock prices as a continuous time series. For instance, the end of day data for stock includes a row for every day or does it? Here’s how Facebook traded over the month of May in 2017. As you can see, there’s these clumps of five samples and then a … Read more

5 – M1L4 06 Technical Indicators V6

So, you have your stock prices adjusted for corporate actions like splits and dividends. How do you use this information to perform trading? When you buy, when you sell, or even which stocks do you buy or sell. You can take these decisions based on signals that can be derived from historical price data. The … Read more

4 – M1L4 04b Dividends V2

The next corporate action we’ll talk about is dividend, specifically cash dividends. Dividends are when companies share some fraction of their profits with their shareholders. Let’s take a look at Qualcomm which pays out dividends pretty much every quarter. On May, 21st of 2017, they paid out $0.57 per share. However, dividends are given to … Read more

3 – M1L4 04 Corporate Actions V5

The next set of data we’ll talk about is related to events a company can take that affects its shareholders. This data is called Corporate Actions. For this lesson, we’ll describe only two of the many corporate actions. Stock splits and dividends. Let’s start with stock splits. On June 2nd, 1998, you could buy a … Read more

2 – M1L4 02 Market Data V5

Let’s start with market data. This is any data that you receive from the market typically generated from trades. This is perhaps the most important form of data relevant to quantitative analysis. Market data is temporal in nature, it’s a series of trading events that happen in a moment of time, each moment is called … Read more