Does Quantitative Investing Have a Future?

[Quant physician]

Hi guys,

Like to share your opinions about this article :

Does Quantitative Investing Have a Future?

And your thoughts on the near future quant job markets ?

 

[bigbadwolf]

Synopsis of the article: "Blah blah blah. So does quantitative investing have a future? The answer likely hinges on the industry’s ability to adapt and innovate."

What is there to discuss? It's not saying anything. Just links to other papers, plus "challenges" and "concerns."

 

[Daniel Duffy]

Synopsis of the article: "Blah blah blah. So does quantitative investing have a future? The answer likely hinges on the industry’s ability to adapt and innovate."

What is there to discuss? It's not saying anything. Just links to other papers, plus "challenges" and "concerns."

Maybe some issues need to be highlighted. win-win

 

[vertigo]

Distorted Traditional value assessments in fixed income markets? Bullshit... Anyone with an inkling of knowledge about the history of FX markets knows that pegged currencies (eurchf) have violent endings.. Governments always intervene and quantitative easing, as a concept, always existed. Another CFA bureaucrat... No ones gives a shit about Basel 3 when it comes to investing. Why would you?

 

[ShowMeTheLight]

Blyth discusses how the post-financial crisis investing landscape has been altered — and how quantitative investors must adapt to reshaping forces. In Blyth’s view, uncertainty abounds: government interventions, including quantitative easing by the U.S. Federal Reserve and the Swiss National Bank’s efforts to weaken the franc, have distorted traditional value assessments in some fixed-income markets. ​

Many of the quant firms are high frequency shops, where longer term issues such as government interventions shouldn't even be a factor. Moreover, a lot of the modern quant strategies are based on superior access to information and ability/speed to act. For example, natural language processing of news feeds or smartphone data.

I would say the factors explained above are more of a factor for traditional fundamental investing. For instance, economics says that currency X should appreciate or the inflation rate should decrease, but then the government steps in and reverses that longer term trend. You only have to look to Fortress or BlackRock to see this in action.

 

[Berk Torun]

Another CFA bureaucrat...

It couldn't be put better

The authors argument about fundamental market shift is quite silly because those shifts also bankrupt many fundamental research driven hedge funds and asset management firms. In fact even the man who became famous for benefiting from regime changes and market shifts got almost wiped out twice. George Soros of course :D, from tech bubble and Swiss Franc rally. After the case with Swiss Franc he announced his retirement. In Davos he said that interventions of governments and international crises increased volatility, uncertainty and unpredictability enormously in the recent years.

There is a certain double standard that whenever quant funds incur big losses, some people not just question their methodology (which would be a fair criticism) but also question their existence as if quantitative finance is alchemy. As Cliff Asness brilliantly said, nobody says "Human judgment failed us today." and it fails us all the time.

Also one aspect that was missing in the article is management fee. I have no particular knowledge about fees but according to Cliff Asness, fundamental research driven funds charge much higher fees. Logically though, several quantitative analysts can cover a portfolio which normally would require dozens of fundamental research analysts. So probably in this area quant funds are far superior.

I do have respect for fundamental researchers as well and perhaps what they are doing won't be replicated by quant models for a very long time. But automation is a very strong trend affecting many aspects of our life and computers become more intelligent each year despite the disappointments in AI. So I would say:

LONG Quantitative Investing