Quantitative Analysis

Investing strategy that uses mathematical and statistical modeling to predict future investment performance

  • People who follow this strategy are often called Quants
  • Goal is to replicate high alpha returns by using mathematics - saving on costs

Common investment factors that quants work with (there are thousands):
  • Often rely on the recent past - don't look far back enough in time/history
    • Usually only go back max 30 years (data from before the 80s is hard to get)
    • This time period doesn't take into account all cycles and is a period with consistently falling rates (does not include rising rate environment)
  • Grants Interest Rate Observer there are errors in quantitative strategies
    • Quants assume that the future will look like the past, when in reality every day is different
    • Quants don't try to understand history - they just back-test it