Quant hedge funds
Hey there, i was wondering if anyone would be able to tell me if there is a prominent quant strategy that doesn’t use algo trading but uses math to beat the market? I’ve tried a few sources online but can’t really find a conclusive answer.
an algorithm is essentially a finite set of rules. those rules can, and in pretty much every scenario, are to some degree mathematical. what do you mean beat the market using math?everything from fundamental analysis to volatility modeling involves math. If you clarify your question then maybe people on here will have some useful insight
sorry that’s my bad, i meant using advanced statistics and things of that caliber to analyse assets, a combination of discretionary and systematic if you will.
Sure, so I'm not at a quant fund so take my answer for what it's worth and hopefully somebody who does work at a quant fund will give you a better answer. The goal of a investor is to predict asset prices and then in some way or another capitalize on the predicted future asset price. Some funds may use purely technical analysis with the belief that prior prices and their movements provide some indication into the future. Maybe other funds use fundamental analysis, believing that prior business factors provide some indication into the future. Regardless of what predictor variables they use, a systematic strategy will utilize statistical methods to forecast the outcome variable.
I'm still not super clear on how the use of statistics to price assets ties into a combination of discretionary and systematic. I'm interested if you could describe exactly the two types of strategies that you are referring to. You mentioned if there are funds that use math or statistics rather than an algorithm but I would say its those algorithmic funds precisely that would in fact use math and statistics.
Quant firms are "systematic". I.e. they use rule-based systems to screen and select investments. How do you implement rule-based systems? With..... algorithms.
You might be thinking of quantamental strategies utilizing quantitative/statistical methods in a discretionary way (e.g. using big data of credit card transactions, satellite imagery of parking lots, twitter sentiment, etc). I haven't heard of any such funds actually living up to their marketing however.
that is exactly what i was thinking of, are there no big funds that do this successfully?
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