What is Quant Trading?
Let start by saying all of these terms essentially mean the same thing: Quant Trading = Algorithmic Trading = Systematic Trading. It could easily be argued that all good traders and investors are systematic – they just vary by degree. In fact, most experts in any field have usually devised a system of how best to go about their task – be it hitting a tennis ball, growing soy beans or investing. Warren Buffett is not at all famous for any kind of quantitative investing, yet analysts at AQR (multi-billion dollar hedge fund with a systematic approach) studied his performance, and founder Cliff Asness said in a Bloomberg interview:
Welcome to our world
If you haven’t got a portion of your capital allocated to a portfolio that is built with the most excuisite attention to detail, where risks have been analysed and prodded from every possible direction, and where you can actually know “how it would have performed in the past”, then why not?
They say “past performance is not indicative of future results”, but if not, we must ask: what then are we going on? Most winners of “Fund Manager of the Year” awards revert back to the mean after their “one good year”. Our quantitative systems are built to be as robust as possible – working “as expected” year in and year out.