Tag Archives: thought experiment

Quant analytics: A thought experiment, quantitative trading strategies vs traditional/fundamental trading strategies

Quant analytics: A thought experiment, quantitative trading strategies vs traditional/fundamental trading strategies

What is the difference between black box trading software and a trader that is unable or unwilling to explain how or why they make their trading decisions(i.e. its intuition driven)?

 

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At the outset they are the same: one is unwilling to show a back-tested edge, and one is not equipped. The first one can be ground-down with the lure of investment, the second cannot. The middle ground is Macro RV: models to help understand the world and a frame work for testing, which can be discussed (in a whisper, but discussed non the less), and an appreciation there is a large vector of qualititive experience that drives the box.

 

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I can better address: ” A thought experiment, quantitative trading strategies vs traditional/fundamental trading strategies “. Given the advent of high frequency trading, at any given instant the observed price of a stock (for example) reflects “quantitative trading strategies” and not fundamentals. In fact, there is a paper athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1977561 which use Nanex graphics to explain seeming price irregularities in high frequency trading. At the end of the day, traders and orr money managers want to produce alpha. Here again, there is some controversy about who can do it, how, and why. Those issues are addressed athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1976082

 

 

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