And you may ask yourself: What the hell is a quant?
During my time as an equity quant over the past twenty-five years, I have seen quantitative analysis grow from a specialized activity to a dominant force in the financial industry. Quants have come into their own, and the future is bright.
What makes quants different?
Quants needed to be masters of a wide array of skills…strengths in mathematics and knowledge of statistics are obvious prerequisites. This requirement explains why so many quants have migrated to finance from backgrounds in mathematics, physics and (in my case) engineering. In addition, to be effective, a quant also needs a solid understanding of business and the financial markets. Traditionally, quants also needed to be strong coders, software architects and database analysts. A good quant also needs a creative, curious and open mind. If you have these skills and interests, I would encourage you to learn more about a career in quantitative finance. I have found it to be an enjoyable, challenging and rewarding path.
What makes financial quant analysis so challenging yet so alluring?
I attended a quant finance conference a few years back where Jeffrey Ma provided a keynote address. Mr. Ma was the basis for the main character of the book Bringing Down the House by Ben Mezrich and the film 21. In his speech, Mr. Ma shared some very interesting and entertaining insights into his life experiences. His successes in applying probabilities and objectivity to gain a competitive advantage resonated strongly with the quantitative audience. In the subsequent Q&A session, a veteran quant in the audience noted an interesting distinction between the game of Black Jack and financial markets: “In Black Jack, you know the odds and the rules, but in finance, we do not know the odds nor the rules.” This statement captures a fundamental (no pun intended) challenge facing quants…the financial markets are chaotic (both mathematically and actually). As a result, one can never directly measure or confirm any physical laws of the underlying financial market system. Therefore, investors can never fully validate their hypotheses or assumptions. Nonetheless, the demonstrable track record of success using quantitative techniques in finance is undeniable, and attests to the effectiveness and veracity of quantitative approaches.
Quants seek order and insights in a domain devoid of known laws or rules. There is no playbook for the financial markets…only informed, talented and motivated players looking for a competitive edge. That edge can be found in many ways: creative theorizing, finding new information, analyzing at data from new perspectives, using new analytical techniques, and borrowing effective techniques from other disciplines or industries. If there were a playbook, it would surely become outdated before its first publication…by definition investment approaches only work when an investor adopts a technique or finds an anomaly not recognized by the other players.
How are quants different from data scientists?
Today, data science is enjoying wide-spread adoption across many industries. In many ways, quants were pioneers of the data science discipline. Quants have always been leaders in data-driven techniques.
There are some important distinctions between quants and other data scientists…In most industries, the datasets are distinct, stable and largely limited to the (customer or manufacturing centric) information systems within a given corporation. But financial quants need flexibility to rapidly and continually explore, experiment, and adopt new information sources to stay head of their competition. For quants: speed, insights and creativity are the name of the game.
Because of these unique characteristics, quants need flexibility from their tools and systems. Here at Scientific Financial Systems, we designed our Quotient product to allow our customers to be creative, easily work with their data, and apply advanced techniques while also honoring their need to keep their work proprietary. We allow analysts to break free from the tedious and messy tasks of data management and integration as well as distracting issues such as currency and security identifier mappings. We are excited to assist with the unique needs to today’s quants. The future is getting even brighter.