Machines and humans team up to hone quantitative investing
Technology is enabling managers to use data analysis to exploit the market and reduce risk
Michael Lewis’s 2003 bestseller, Moneyball: The Art of Winning an Unfair Game, tells the true story of how Billy Beane, GM of the Oakland Athletics baseball team, was able to turn around the team’s fortunes through the use of data analysis. Beane was able to exploit inefficiencies in the market for baseball talent through a statistical approach rather than the gut instinct-based scouting approach prevalent at the time. This allowed his low-budget team to triumph over other highly funded competitors. This same approach can be applied to investing – using data analysis to identify and exploit market pricing inefficiencies. Although this quantitative approach can be traced back to the 1930s, the growth in assets managed quantitatively has been relatively slow – at least until recently. Much has been made of the recent rise of passive investing and smart beta, but the hottest investment trend globally is quantitative (quant) investing. Quant hedge funds have had eight successive years o...
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