Quant Analysis - (Quietly) Breaking Down Walls
I was recently watching the movie “Moneyball” (based on the best-selling book: Moneyball: The Art of Winning an Unfair Game by Michael Lewis). The movie chronicles the life of Billy Beane – a figure that transformed baseball (and all sports) by raising awareness of the awesome power of information, data and statistics – when used creatively, wisely and responsibly. Bill Beane blew-up the conventional wisdom of baseball management by embracing the pioneering work of his mentor Bill James. Towards the end of the film, Billy Beane’s character is offered a key position in the Boston RedSox organization. John Henry’s (Red Sox owner) character states: “Anybody who is not tearing their team down right now and rebuilding it using your model…they’re dinosaurs.” And so it goes in finance, quants – or any business.
The financial landscape is now dominated by investment shops that have embraced quantitative techniques. Pioneering firms like: The Production Company, Citadel, AQR, DE Shaw, AQR, Renaissance Technologies have lead the charge into this new frontier through the visions of their founders such as: J.Doyne Farmer, Ken Griffin, and Jim Simons. Their stories and others are highlighted in the best-selling book, The Quants by Scott Patterson. Such pioneers have been an inspiration and a motivation to my career as a quant.
Recently, I have been listening to some very informative podcasts on the state-of-the-art in artificial intelligence and machine learning. One podcast of note is: “AI Today Podcast: How AI is Being Applied to the Stock Market – Use Case Series” published by Cognalytica. In the podcast, the hosts mention “AI is a competitive advantage for everybody, so we are definitively expecting to see more AI increasingly be part of the picture”. But the hosts go on to acknowledge: “I bet you there is a lot of stuff out there that is not public”. Finance “is one of those places where you will see people very guarded about what they do here, and we’ll probably never hear about the things that are really truly working…No one is going to say: ‘look at this great AI system I built that is giving me an advantage over everybody’. They’re not going to say a word. That is the challenge of this industry.” These comments speak to the underlying secrecy, aggressive competition and technology escalation in the financial markets.
I founded Scientific Financial Systems because I believe in the power of disciplined, informed quantitative investing, and I want to assist in the adoption of quantitative techniques in finance. At SFS, we are dedicated to advancing the state-of-the-art in the application of technology, AI and data science to the financial markets.
What a fascinating journey it has been to be part of the quant movement. I am excited to support the next generation of quants as they lead the charge forward.