Brisbane Chapter, Sat, 11 Aug 2018 at 9:30 am
Visitors are welcome. First visit free, subsequent visits $40.
9:30 am–9:45 am: Welcome and Introduction
9:45 am–10:00: A Book Review by David Glover
10:00 – 12 noon: What’s new: Momentum Trading by Dr Bruce Vanstone
In its simplest terms, momentum refers to buying stocks which exhibit past over-performance. Research shows stocks exhibiting strong performance over some defined historical period, have a tendency to continue to exhibit strong performance for some number of future periods. It means traders and investors (traders) can potentially hitch a ride on strong momentum stocks.
The momentum effect has been widely researched and documented in both the international and Australian equity markets and has also been documented in other asset classes, such as foreign currencies, commodities and real estate.
Many traders would know of the academic notion of the ‘efficient’ market, and the implication this efficiency has on the ability of traders to earn profits. What may not be known is the father of the ‘efficient market hypothesis’, Eugene Fama, refers to momentum as “the premier unexplained anomaly”. In other words, the success of momentum based investing is regarded by many as an exception to the efficient market hypothesis.
It is fair to say the momentum effect appears to be one of the most beneficial effects for traders. Thorough research appears to indicate momentum based trading does not increase risk, and momentum effects are present during both economically good and bad cycles.
Like all approaches, momentum trading is subject to the vagaries of the trader and poor returns are not so much a function of the strategy, but of the implementation of that strategy. All strategies benefit from the increased discipline and accountability that mechanical, rule-based trading brings, particularly during difficult investment cycles.
From a quantitative point of view, momentum trading also carries a number of clear benefits. It is simple to quantify, it is non-subjective, and it is robust to parametric modelling changes. The momentum approach also has academic credibility, and is the subject of ongoing research by some of the world’s best finance academics.
Although the study of momentum shows there is slightly more "raw" risk than a pure index investment, there is the potential for substantially higher returns. It is precisely this possible mismatch between risk and reward which qualifies momentum as an approach worthy of further study. It's no wonder academics call momentum, "the premier anomaly"!
Trading and investing are difficult propositions. The average trader needs to put in a significant amount of time to develop the level of market expertise required to be successful. A rules based strategy allows for the trader to specify the conditions for the buying or selling of stock and this can lead to clear entry and exit points, and reduces subjectivity, and worry.
Perhaps the most important consideration when using a momentum based approach is the idea of using models and rules to frame the way risks and returns are managed allowing a trader to better cope with the inevitable volatility markets bring, especially during times when financial markets are under stress.
The above material was taken from a three part series written by Dr Vanstone titled “What’s new: Momentum Trading” this will form the structure of his presentation.
How can you prepare for this presentation? Listen the following interview on You Tube.
“143: The DNA approach to trading with Bruce Vanstone”
Produced by Better System Trader and published on Mar 18, 2018
Bruce Vanstone is an experienced portfolio fund manager and trader. He is an Associate Professor at Bond University where he obtained a PhD in Computational Finance. His key skills are the development, testing and benchmarking of quantitative trading and investment systems; complimented by his book “Designing Stockmarket Trading Systems”. For those looking to become more evidence-based and/or systems traders, refer to www.vanstonetrading.com for course information.
12:00–1:00 pm: Lunch
1:00 – 1:45 pm: Reading an Academic Paper from a User perspective – Tim Young
The following is an extract from the Better Systems Trader podcast ‘143: The DNA approach to trading with Bruce Vanstone’ where Bruce makes the point we should look for things (strategies) that are ‘academically credible and don’t go chasing pipe dreams’. But what is an academic paper and how should we read one? I will try to answer these questions.
“Great question! Look, I think for me, it’s two things. One is when I first started getting interested in investment and I started doing a bit of searching around, I realized that we’re actually doing a lot about markets, maybe not as individuals, but as an academic cohort, there are a lot of academics. There’s an entire army of academics out there, researching in strategies that work, and so I think just getting a piece of software and messing around with it, without going and doing the background reading that’s required, it puts you at an extreme disadvantage.
Go on and have a look at what other people are doing. Go to Google Scholar. scholar.google.com and then you’ll be searching amongst academic articles and search for things like momentum or whatever your favourite terminology is, and you might find there’s a huge amount of work there already done on it and a lot of lessons already learned. That’s one thing is look for things that are academically credible and don’t go chasing pipe dreams.”
1:50 pm–3:20 pm: Dr Bruce Vanstone’s presentation continues
3:30 pm: Meeting Close
iNext meeting: Sat, 8 Sep 2018 9:30am - 3:30pm
Next Meeting Venue: Community Meeting Room 2, Logan Central Library, 26 Wilbur Street, Logan Central, Logan City QLD 4114
Next speaker: Gary Burton's workshop on Charting Techniques and Price Action Analysis
Future meetings: Generally of the second Saturday of each month.
- Sat, 11 Aug 2018 09:30 AM
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