This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.
Summary:
The risk parity portfolio technique enables us to identify optimal asset weights in the portfolio so that the contribution of each asset toward the total portfolio risk is equal.
I Know First provides daily market forecasts for a broad range of financial assets for six investment horizons from 3-day to 1-year which help to identify the most promising financial assets according to the AI algorithm.
We can build a portfolio based on the IKF AI algorithm, and construct the risk parity portfolio where each asset has the same risk contribution rate to the total portfolio risk.
This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.
Summary:
Different stages of the stock market require stock selections that are more suitable in the current macroeconomic environment.
The strategy based on sector rotation in periods of expansion and recession can generate an additional excess annual return compared with the stock market return.
I Know First provides the ETFs package based on the AI algorithm to find the most promising investment opportunities according to the macroeconomic environment.
How Can We Predict the Financial Markets by Using Algorithms? Common fallacies about markets claim markets are unpredictable. However, chaos theory together with powerful algorithms proves such statements are wrong. Markets are chaotic systems with complex dynamics, yet to a certain extent we can make valid stock market forecasts. Using these forecasts generated by cutting-edge predictive algorithms together with a careful risk management strategy may give a trader a significant competitive advantage.
Markets Are Complex Systems
Looking at the common fallacies about stock markets, we can see two major groups. The first group is connected to the classical economic theory, which claims that markets are 100% efficient, and as such unpredictable. However, trying to make predictions regarding the markets is useless anyway, as no stock can be possibly be a better deal than another. Both of them are efficient and everybody in the market has perfect information available to them. From our daily lives it is obvious that this does not truly reflect reality. There are people who actually profit trading stocks, which should not be possible in this idealistic market of economy theories.
This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.
Summary:
Herding behavior refers to the tendency of individuals to follow the actions or decisions of a larger group of people, rather than making independent decisions.
The CSAD model enables us to identify periods of herding behavior on the stock market.
We implement the CSAD model and identify cases of herding behavior on the stock market for the period from January 1st, 2020 to April 19th, 2023.
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