Controlling for over-fitting... and Renaissance Technologies

[mizhael]

Heard that Renaissance Technologies never hire people having Wall Street experiences... and all they hire are quants.

So they are not fundamental traders.

Their trading strategies are not based on fundamentals... instead, they are based on statistics...

Therefore, they must have a lot data-mining and fitting there.

Maybe their success is about how to control for over-fitting in their statistical data-mining process? They must have put up a framework, to weed out bad strategies...

Any thoughts?

 

[nLepwa]

Quote from mizhael:

Heard that Renaissance Technologies never hire people having Wall Street experiences... and all they hire are quants.

So they are not fundamental traders.

Their trading strategies are not based on fundamentals... instead, they are based on statistics...

Therefore, they must have a lot data-mining and fitting there.

Maybe their success is about how to control for over-fitting in their statistical data-mining process? They must have put up a framework, to weed out bad strategies...

Any thoughts?

A large part of what they do is exploiting dependencies in portfolios.

It hasn't much to do with curve fitting.

Ninna

 

[poyayan]

They start from the commodity market. That should tell you something.

 

[mizhael]

Quote from nLepwa:

A large part of what they do is exploiting dependencies in portfolios.

It hasn't much to do with curve fitting.

Ninna

Please don't take my "curve fitting" narrowly...

How do you exploit dependencies?

Using statistical data-mining, right?

Then you have the danger of over-fitting...

 

[mizhael]

Quote from poyayan:

They start from the commodity market. That should tell you something.

What's special about commodity market?

 

[nLepwa]

Quote from mizhael:

Please don't take my "curve fitting" narrowly...

How do you exploit dependencies?

Using statistical data-mining, right?

Then you have the danger of over-fitting...

Not necessarily.

Statistical arbitrage goes beyond data-mining.

Ninna

 

[ChkitOut]

whatever they are doing, it's working.

http://dealbreaker.com/2011/01/2010-performance-for-rentec-sac-capital-bridgewater-and-tudor/

 

[intradaybill]

Quote from mizhael:

Heard that Renaissance Technologies never hire people having Wall Street experiences... and all they hire are quants.

Exactly because people with wall street experience are brainwashed enough to produce mean performance. They go for the extrtemes, hopefully the one to the right.