Quant investing strategy and algo trading for stock market investing beginners. I share my views.
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30 Comments
I think this Video is really a bit irritating. First, saying quant doesnt work on a 3 year underperformance of funds (we even dont know If they really stick to their models) is nonsense. O'Shaughnessy and others showed that every strategy works in cycles and everything below 10 year period says nothing. Furthermore, even praised Graham basically gave a Quant strat to defensive investors with His formulas and Checklists. Even you said in one video: getting 10% return is easy, just buy stocks with pe below 10. THAT IS QUANT! Buffet says for newbies: Buy the Index. INDEXING ALSO IS QUANT (buy the biggest stocks). Of course only few strategies make sense (fundamental and Momentum) and you shouldnt fall for Data mining (Data said when i buy Tech stocks with first Letter F on a rainy day i will be rich). But what ist wrong with buying 20 stocks of s&p500 with positive Cashflow, low p/s, and healthy Balance Sheet? The only hurdle is: Find a strategy you Understand and believe in and follow it. Qualitative approach is good and all but for normal Afterwork Investors just not feasible imo. In your analysis, you really miss that the point where most people are struggling is Handling their emotions and get tricked by their brain. I rather eliminate that fact and live with slight underperformance (even though i dont think that happens) than spending 40 hours research a week beside my actual work which i could spend with my famliy just to get fooled by my burned-out brain. Short: There are two Wirkung approaches: Quant or qualitative. Latter has better Chance/Risk but first hast way better Chance/(Work*Risk).
Hey Sven! Do you ever use stop loss orders to "lock in" a profit? Let's say that you are up 65%, and you want to protect what you've made so far. Would you ever create a stop loss order to sell at 40% in case of a crash? Thanks!
Thats right Svens not for sale. Hes a simple investor working a Boutique selling Genoa Salami and traditional SpicyKulen from his homeland out of Amsterdam.
Like a Real Capitalist Merchant.
So Fuck off you Gypsy Hedgefund Fascist in midtown Manhattan. 🗽
I would argue quants are having the best of times now. Because of the AI hype we got rich on high quality and accessible machine learning & general statistics study materials. I do believe machine learning can outperform just about anything for enough a period of time *not* by luck but with deep understanding and usage of ML algorithms. James Simons is the example, he got rich just because he put this huge effort and knowledge to develop his algorithm ahead of all else. With whole universities and basically any high cap company/country funding this researches I do expect us to have an exponential growth in algorithm complexity and efficiency – think 5-10years. The non-BS AI community has made tremendous advances in creating tools that speed up the understanding and testing of such algorithms (Talking about TensorFlow ofc). The cheap computing power also allows for bringing old algorithms to life. Unlike Level 5 autonomous vehicles… stock trading is a relatively low dimensional state space and sentiment is a big factor!!!!!! The sentiment analysis has greatly advanced in the past years starting with the public Twitter sentiment data set. I doubt any of this will be easily accessible to the casual investor to piggyback on so I totally agree to stay away from quant funds…
I don’t understand your predicate and conclusion. There is no Buffet of quants therefore quantitative methods are not valid? Not trustworthy? Not investable? Until quite recently there were no buffet of tech. There’s also no buffet of cleaning products, so what? 😊
There have been quite a few successful ones: Jim Simons, David Shaw, John Overdeck, et cetera but that’s besides the point.
Quantitative approaches got a bad rep after Taleb but for better or worse its here to stay. Cash executions in the EU are all electronic now and the US is heading in that direction, some of this is regulatory driven. I would rather my pension fund manager get a TCA report to prove best execution than to only execute high touch with his buddy voice desk. The average retail guy has also benefited from lower costs and higher liquidity/tighter spreads.
You are right in that there is no free lunch. The barrier to entry for a “pure quant fund” is very high. The cost of low latency infra (to compete with the likes of Virtu/jump) is insane and the cost of talent is even greater.
The word “Quant” is very loose meaning and spans a huge spectrum. Please don’t lump everyone together as some dodgy nondescript retail scam fund.
Full disclosure: I come from a Strat background.
Hi it is true that algo competes with each other and one of their purpose is to provide liquidity to the market.
But there is one that makes billion, Renaissance Medallion Funds. Owner is a math genius.
Their hundreds of strategies keep evolving as competitors change their algo.
You are right that best to invest in yourself as there is no sure way of making money. I can imagine you catching the bottom of the upcoming down trend and ride it for next 5 to 7 years.
You will be a millionaire by then.
Patience.
Was surprised Renaissance Tech lost money in October
How do I tell this to my friends are quants lol
Nice presentation 👍👍👍
Jim Simons is a genius 😀 Everyone I send in an order it gets filled by citadel securities 🙂
Love your work ethics at the start!
I study Quants.. I really liked this video 😊
Proud to hear you resisted their offer. Stay true to yourself.
SVEN PREPARE YOURSELF FOR ENDEAVOUR, HBM, FIRST MAJESTIC SILVER…. YOU WILL BE RICH
I might be wrong but isn’t Renascence Technologies the leading quant hedge fund (and pretty performing)?
Quant algo smacks of numerology a bit, doesn't it ? Nevertheless, it needs to be said big data is something like a microscope of our time allowing us to see patterns previously hidden. If AI can play Go at superhuman level, it can master stock market, too. It can process billions of data points in a second, it can predict human behaviour, maybe it can even change it without anybody noticing that. The future will be interesting…
I have family working for a Quant Brokerage, they facilitate quick reactions to trading changes etc. for hedge funds, I suspect anyone who invests in a fund of any kind today is exposed to this type of tech. However, beware anyone who uses “gold”, crypto” or “quant” in their company/fund title, it’s just the sparkle to catch your eye and sell you crap.
This is exactly what was in my mind. LTCM ! I red the book 🙂
Kanye West bought Kim Kardasian 250k worth of Disney and Amazon stock certificates for her birthday, how do you explain that?
Sorry, I didn't understand the example of long term capital management shown on your video. Can you give more info in another video?
Certainly, quant trading is not for everyone. But since I develop algos myself I know what they can achieve and the results outperform all the old asset classes such as bonds, stocks and real estate. The latter are in addition in a bubble due to cheap debt so everybody is only waiting for the global crash. But hey, good luck anyhow.
Te felicito por tu contenido, esta muy bueno.
Yo estoy haciendo videos explicando conceptos de la bolsa en 5 minutos.
Te invito a chequear el ultimo y pasarte por mi canal!
Saludos 😀
https://youtu.be/ed2FWNWwE3I
LMAO this is so true, as soon as a strategy is published it stops working because people adapt to it. Benjamin Graham talked about this in his books!
the problem is trying to put machines quantifying human emotions. black scholes model does not work.even if machines got it right, humans would adapt and change way they trade lol
Renaissance's flagship quant Medallion fund which is employee owned (and strategy depends on their being limited capital) is famed with one of the best records in investing history. Worth checking out is a Howard Marks letter to shareholders this year on Investing Without People.
Simons has better returns than all other traders ever – do your homework~
hi, I'd like to clarify a little bit, quant involve hypothesis and testing. Someone using quant directly in market is just dumb. Using quant require reading a lot of academic papers and be aware of new models out there. Also using quant without fundamental analysis (helped by bot :p ) is not the way to go. It is not something like quant vs value investor vs technical analysis but more like a systemic approach to develop a intuition of the market based on strongly tested models , technical analysis, trading strategies and fundamental analysis. While I'm valuing value investing way more than others investments models, I do belief that it can be integrated in a quantify systemic approach.
Renaissance Technologies, Citadel, Two Sigma, AQR… There are plenty of funds making good money as a quant shop.
Jim Simons' Medallion Fund has way better track record than Buffet. Not trying to be rude but you really need to do more research on this topic
Anyone starting in Investing should always learn all of the quantitive stuff because it helps you understand the risk management aspect of this business.
I agree. Of course, there are quant investors earning a lot of money(like Jim Simons and Steven Schonfeld), but they didn't start creating an algorithm in their bedroom and investing using it. Jim had DECADES of work in advanced math, earning numerous academic awards in the process. Steven already had a lot of money and a good policy to attract the best mathematicians and programmers. I don't like quants myself, but I guess they're a viable option(if you have a giant understanding of advanced math or lots of money to find someone who has.)…
But there are other quant strategies, not only for arbitrage