Unfortunately, some of these post neo modern rocket science funds have stepped into Distributions that have been generated in a different kind of Stable.Quote from MAESTRO:
And that law is the Law of Stable Distributions â the only law that is practical enough to extract dollars from markets! All the other âlawsâ are simple derivatives of this universal law! The sooner one understands it the sooner he/she will become successful in the markets.
The New Math: Quantitative hedge funds are pressing into new realms of science
- Thread starter makloda
- Start date
Surely if the name of the game in trading is making consistent profits and that is how to measure the success of any quantitative strategies then you should re-read the first post.
I'm no rocket scientist,but it looks like a few of their strategies "went wrong".
Like I said in an earlier post,these bunch of 'quants' aren't as clever as they think.
How about this one:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1015987
What Happened to the Quants in August 2007?
AMIR KHANDANI
Massachusetts Institute of Technology (MIT)
ANDREW W. LO
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER) November 4, 2007
Abstract:
During the week of August 6, 2007, a number of quantitative long/short equity hedge funds experienced unprecedented losses. Based on TASS hedge-fund data and simulations of a specific long/short equity strategy, we hypothesize that the losses were initiated by the rapid unwind of one or more sizable quantitative equity market-neutral portfolios. Given the speed and price impact with which this occurred, it was likely the result of a forced liquidation by a multi-strategy fund or proprietary-trading desk, possibly due to a margin call or a risk reduction. These initial losses then put pressure on a broader set of long/short and long-only equity portfolios, causing further losses by triggering stop/loss and de-leveraging policies. A significant rebound of these strategies occurred on August 10th, which is also consistent with the unwind hypothesis. This dislocation was apparently caused by forces outside the long/short equity sector - in a completely unrelated set of markets and instruments - suggesting that systemic risk in the hedge-fund industry may have increased in recent years.
I read the article. They are talking about statistical arbitrage, almost exclusively in equities, with one mention of the guy doing commodities. A smattering of equity market neutral (most of which are NOT quantitatively run) and pairs trading. These strategies are built almost exclusively on back tests, i.e. data mining.
It seems as if some think this is the entire universe of quant strategies out there. I can assure you it is not.
Anybody notice they stopped writing articles about trendfollowing/managed futures funds? Maybe it's because they're up 20.35% for the last 12 months? I remember the wave of articles claiming trend following is dead and how their "computers models stopped working" in 2004 and 2005.
Once Quant equity/market neutral funds are back yielding returns close to their historical averages I bet we won't hear a thing on Bloomberg anymore. They'll find another strategy they can declare dead and obsolete by then.
Once Quant equity/market neutral funds are back yielding returns close to their historical averages I bet we won't hear a thing on Bloomberg anymore. They'll find another strategy they can declare dead and obsolete by then.
Great.So in a few years when these other quant strategies seem to be working well and are earning a fortune we can all wait for them to implode too.
I lost total faith in these quant guys and the level of their 'genius' when one said the pattern of events that took place which blew them out of the water should only happen once every 10,000 years.Ridiculous,and frankly arrogant.
Why is it that people are so quick to criticize someone when they are down, even after racking up Billions in profits in years before? Other traders/investors seem to love seeing people fail, even if they are complete failures themselves. The thing about this guy? He'll be back and when he comes back it will be with a vengence while others who criticize him will still be trying to "find their way."