21 August 2016

The Truth, The Whole Truth

Once again, into the breach. R is a fantastic stat command language, i.e. SAS/SPSS/etc. on the cheap. And, as mentioned many times here, a lot of R-bloggers aggregation consists of armchair London Whales seeking riches from quantitative investing. And, again, events drive data and not the other way around. But who am I to cavil?

How about a mainstream pundit?
As high returns on capital are likely to be present in every high-quality business, the quantitative system will likely conclude that every business that earns excess returns on capital is a high-quality business. This argument is not very different from saying that because I play using Wilson racquets, I am Roger Federer!

Or this assessment:
It is widely believed that the primary reason quant funds stumbled badly beginning in mid-2007 was correlation between managers, compounded by leverage. Common metrics of value and momentum, the argument goes, led quants to hold similar stocks. Then, when stocks began to sell off, many quant managers found themselves racing for the exits at the same time. Leverage employed by some players only compounded the problem.

AKA, lemmings galore. They all look at the same numbers, generate the same output, buy the same assets, and attempt to exit with their winnings at the same time. Not to ignore "Viagra at Home" messing with the quants' heads. 2008. Events drive the data.

HFT, on the other hand, is sorta kinda quant investing. Really, just lots of capital trying to be the first front runner, but it is sorta kinda computer based trading. Right.

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