The New Math: Quantitative hedge funds are pressing into new realms of science
- Thread starter makloda
- Start date
Frankly, I donât give a damn! I am one of the âQuantsâ you will find around! I have been running our trading operations for a lot of years quit successfully, (thank you very much) without âraking billionsâ or âblowing upâ. Simply making 20 to 40 % annualized with a very low volatility equity curve. Not exciting enough? Oh, well ⦠I am damn proud of what I do! So if some âfreshly bakedâ newbie blows a Quant Fund it has nothing to do with true scientists that sit quietly and create âboringâ strategies that generate âboringâ returns!
http://www.fiercefinance.com/story/...pain/2008-01-15?utm_medium=rss&utm_source=rss
That hedge funds are having trouble should not be underestimated. But like markets, people get too pessimistic and overshoot to the downside, and get too optimistic and overshoot to the upside. On the internet, spinning some story to whatever you want makes the emotionalism even more pronounced.
All this said, the pain is real, and these are smart people that have been making money for a long time, and are no longer in some strategies.
Something fundamental has changed. It is very likely that there is an inefficiency that has come to the fore that used to not exist as a result.
nitro
That hedge funds are having trouble should not be underestimated. But like markets, people get too pessimistic and overshoot to the downside, and get too optimistic and overshoot to the upside. On the internet, spinning some story to whatever you want makes the emotionalism even more pronounced.
All this said, the pain is real, and these are smart people that have been making money for a long time, and are no longer in some strategies.
Something fundamental has changed. It is very likely that there is an inefficiency that has come to the fore that used to not exist as a result.
nitro
Which of "these other quant strategies" are you referring to?
What about all of the other quantitative managers out there whose strategies have worked, are working, and will likely continue to work? You'll just dismiss them because one quant manager took too much leverage and blew up? Heavens to Betsy.
I'll second that
Hey MAESTRO, I wasn't trying to pee in your cup. Hope you didn't take it that way. I'm not ripping on Quants because I a fair amount of Quant work myself. I'm ripping on the folks who are criticizing those running through troubled times. Granted, these hedge funds should have had "what if" strategies but chances are many of them will be back. And of course, some will never return.
The market has definitely changed. The primary reason many funds have failed is because they were not able to adapt to changing market conditions. If the model is looking for an input of X and receives Y there will be trouble. Hedge Fund managers need to adjust their strategies when the input variable changes.
I agree with everything you say but one thing: these people are not stupid, and something as simple as variable x instead of variable y has been looked at. It is as if they were assuming the gravitational constant on the Earth, and all of a sudden g switches to the gravitation constant on the moon. Note the inputs are the same, but they assumed a constant, when in fact it may be variable. What is worse, there may be a lower bound as to what the value of g is to make the equations of motion work (tradeable). They continued to trade the strategy in a moon-gravity field, banging their heads against a wall. Perhaps an even better example is Einstein's Cosmological constant in his field equations, where the action changes based on it's value!
No, I say something at the core of markets that has drastic consequences has changed certain edge of quantitative strategies to negative. I have my own theories as to what it(they) is/are...
nitro