Also hydromatic, automatic: "It's Geeks Enlightening" Rob Carvers blog about quant trading, investing, and economics.
This is post #10 in my 2026 series on portfolio optimisation. Time for a quick recap. I'm not going to revisit every post but instead summarise what I now think one should be doing when optimising forecast weights before costs (I haven't yet incorporated costs, nor thought about instrument weights). Pool all instrument returns together At a minimum use a 40 year EWM for SR estimates (and…
The mega blog post series on portfolio optimisation continues! A couple of posts ago, here , I looked at using the idea of formal testing for structural breaks in parameter estimates. Important parameters like Sharpe Ratio (SR). Because stuff like this happens: This is the pre-cost performance of the momentum4 rule on CORN. The formal test found a structural break in 1989. It's fair to say the…
This is the eighth post in a series I'm writing on portfolio optimisation. I haven't done one of these for a few posts, so here is the story so far: In the first post I showed that if you are optimising across forecasts from different trading rules and instruments, then you should first fit within; and then across, instruments. As I do anyway. In my second post I ran some experiments with…
Here's a nice picture from a lovely book written by a top bloke : It shows the cumulative p&l from different speeds of momentum over time (for portfolios containing 102 instruments) over 50 years of data. Notice how the two fastest speeds (2&4) get worse in the second half of the sample. I've called the line #2 here the 'second most famous hockey stick graph in history'. It certainly looks like…
This is the sixth (!) post in a series I'm writing on portfolio optimisation. A quick reminder of the story so far: In the first post I showed that if you are optimising across forecasts from different trading rules and instruments, that the rules within an instrument cluster naturally together, suggesting you should first fit within; and then across, instruments. Luckily, this is what I've always…
TLDR: This is a post about something that doesn't work. So don't read if you only care about cherry picked delightful backtests. This is my fifth post in a rapid fire intense series on portfolio optimisation. In my last post I looked at the optimal amount of shrinkage to use with real data, when running a bayesian methodology for mean variance optimisation. I found two things. Firstly, the optimal…
This is my fourth post in my summer 2026 mini series on portfolio optimisation. It will very much follow the format of (also with a sports alluding title) blog post number two , so it might be worth rereading that. A reminder if you can't be bothered, I used random data to compare some optimisation methods: monte carlo (random, parameteric) bootstrapping (random, non parametric) double shrinkage…
This is my third post in a series about optimisation and fitting. In my previous post I used random data to calibrate and evaluate many portfolio optimisation techniques. It's worth quoting in full from that post: Random data is not real data: Well duh. But why is this important? Because random data is drawn from a fixed and well behaved distribution. This means the optimiser only has to discover…
As I said in my last post I'm currently in the process of a mega-sized research project on fitting . In the first post I examined the correct way to cluster combinations of trading rules and instruments. This next post is rather meatier, and is about evaluating and calibrating some portfolio optimisation techniques. We might call this 'meta optimisation', since we want to find the best way to do…
This will be the first in a series of posts about portfolio optimisation. Main reason being I'm planning to write a book about backtesting, and that will include a big chunk of material on optimisation. Yes, I know, my latest book isn't out yet ( it's out in December - in time for Christmas). But this backtesting book is going to be quite deep (and probably long!) so I need to start researching…
This is how I started last years update: "Mad out there isn't it? Tarrifs on/off/on/partially off/on... USD/SP500/Gold/US10/Bitcoin all yoyoing like crazy." Well the orange peril is still at it, and as I write this the global supply of oil has been severly curtailed for several weeks now; with a certain amount of reaction in oil futures (which some of it perhaps supressed since apparently "cash on…
Not a finance post today, but something I feel compelled to write about after one of the strangest experiences of my life. It's also a scam warning, and it's good to share those. So pull up a chair, put your python IDE and copy of Advanced Futures Trading Strategies down, and relax whilst I tell you a story. A few weeks ago I was sent the following email: Hi Robert, I’m the organizer of Classics…
Well that blew up: https://x.com/investingidiocy/status/2032438612961165409 At eight words this is almost certainly* my most viewed and liked tweet ever (although I have nearly 25k followers, so thats 18,000 or so that didn't like it) . Short, pithy, funny; I should retire from my Xmaxxing game right now (just kidding; there are still plenty of gamblers, crypto nuts and MAGA idiots waiting…
No, it's not one of those 'make $$$ easy by trading' courses, it's a dull and tedious one about robust fitting and backtesting. This is the first* time I've taught outside of a university. * and possibly last, we'll see. This could be a one-off opportunity. In person and remote:…
A short and slightly mad post today, inspired by weird thoughts I was having when I awoke from my sleep this morning (yes, you are all thinking, a completely unwanted insight into the life of Rob). Clickbait is at the end. There has recently been an uptick in the world of prediction markets . Although not new, and certainly in the UK political betting in a market based environment has been around…
I have a friend, ex-colleague and TTU co-host who runs a fixed income focused CTA. We have regular coffees (he pays, so his fund is doing ok) and one of our favourite topics for arguing debating making polite conversation about is why fixed income is so much better for trend than anything else. He's biased, but then arguably so am I; I started my career trading rates options, and we both managed…
An unusual (but quick) mid month post, as this is a live issue I thought I'd publish this whilst it's relevant. There has been some controversy on X/Twitter about 'pay to play' prop shops (see this thread and this one ) and in particular Raen Trading . It's fair to say the industry has a bad name, and perhaps this is unfairly tarnishing what may pass for good actors in this space. It's also…
I'm a vol scaler. There I've said it. Yes I adjust my position size inversely to vol. And so should you. But to this well we need to be able to predict future vol; where the 'future' here is roughly how long we expect to hold our positions for. Some people spend a lot of effort on this. They use implied vol from options, high(er) frequency data, GARCH or stochastic vol models. Other people don't…
Here's some research I did whilst writing my new book (coming next year, and aimed at relatively inexperienced traders). Imagine the scene. You're a trader who products forecasts (a scaled number which predicts future risk adjusted returns, or at least you hope it does) who wants to evaluate how good you are. After all you've read Carver , and you know you should use your expected Sharpe Ratio to…
It's probably bad luck to say this, but the most recent poor performance of CTAs and trend following managers this year appears to have been reversed. My own system is up over 12% since the nadir of the summer drawdown, and is now up for year; admittedly by only by 5.5%. Nevetheless, it's true to say that trend following performance appears to have been degrading over the last few decades. If I…
In my previous post I discussed what would happen if you did the crazy thing of doing a PCA on the whole universe of futures across assets, rather than just within US equities or bonds like The Man would want you to. In this post I explore how we could do something useful with them. There is some messy code here , to run all of it you'll need psystemtrade , but you can exploit big chunks with your…
I know I had said I wouldn't be doing any substantive blog posts because of book writing (which is going well, thanks for asking) but this particular topic has been bugging me for a while. And if you listened to the last episode of Top Traders Unplugged you will hear me mention this in response to a question. So it's an itch I feel I need to scratch. Who knows, it might lead to a profitable…
I'm now in full book writing mode, so I don't have the time to do full blog posts. Instead I plan to do a series of quick posts where I share some research I did for the book. Cynically, there is also a chance it will encourage you to buy the book, as long as I don't overshare like one of those movie trailers that gives away the plot and includes all the best action scenes. Overfitting - A…
I did post recently , from which I shall now quote: Two minute to 30 minute horizon: Mean reversion works, and is most effective at the 4-8 minute horizon from a predictive perspective; although from a Sharpe Ratio angle it's likely the benefits of speeding up to a two minute trade window would overcome the slight loss in predictability. There is no possibility that you would be able to overcome…
Mad out there isn't it? Tarrifs on/off/on/partially off/on... USD/SP500/Gold/US10/Bitcoin all yoyoing like crazy. Seems a good moment to be slightly reflective. I skipped my annual performance update last year, a little sad given it was my tenth anniversary. Mainly this is because it had become a lot of work, covering my entire portfolio. The long only stuff is especially hard, as all my analysis…