As a test, I wanted to see how the rank of returns could be used as a factor in alphalens. I shifted the 'get_pricing' dataframe so that I could compare the current returns with current returns i.e. I used returns to predict itself (using close prices). The fact that I used ranks means that good performance is never guaranteed - it all depends on how the market did on any given day. However, when comparing mean returns by quantile, one should expect them to be increasing from left to right but this not the case. After all, we are perfectly predicting the ranks. Please if someone could assist in helping me understand this? Please refer to the notebook attached.
Your code is correct, except that you need to shift the price by 2 days. This seems surprising but keep in mind the following: pipeline Returns calculation is done every day with yesterday close price and 2 days before close price. So "today" you can get "yesterday" returns and you need to shift the prices by 2 days to introduce the bias you need to make the factor predict the future.
Thanks Luca. So then am I correct in saying that USEquityPricing.close refers to yesterday's close price while the result from "get_pricing" given parameter "close_price" yields todays most recent price?
Yes, that's correct. Pipeline output might seem surprising but it makes sense. When Pipeline is used in an algorithm, the pipeline output is fetched in 'before_trading_start', that means before the today price information is available . So "today" most recent open/low/high/close prices refer to yesterday. I guess Q wanted to keep the same reasoning in Research.
Great! One more question. I've attached a notebook where window_length=3. From my understanding this is 2-day returns and should correspond to the parameter period=2 in 'get_pricing'. But when I run alphalens, the IC is higher in period 1 not 2. Any ideas why this is the case?
Please sign in or
join Quantopian to
post a reply.
Need help?
Contact support.
Company
Learn & Support
Notices
Follow Us
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.
In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.