{"id":27476,"date":"2024-07-04T23:56:00","date_gmt":"2024-07-04T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=27476"},"modified":"2024-08-12T07:16:28","modified_gmt":"2024-08-11T23:16:28","slug":"quantitative-investment-com","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/","title":{"rendered":"Commonalities in Quantitative Investment"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Quantitative_investing_is_indeed_interesting\" >Quantitative investing is indeed interesting<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#My_sharing\" >My sharing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Several_representives\" >Several representives<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Characteristics_of_team_members\" >Characteristics of team members<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Members_professional_diversity\" >Members\u2019 professional diversity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#All_are_smart_people\" >All are smart people<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Financial_background_does_not_matter\" >Financial background does not matter<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Extremely_dependent_on_mathematics\" >Extremely dependent on mathematics<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#All_are_mathematicians\" >All are mathematicians<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Model_is_the_foundation\" >Model is the foundation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Three_major_theorems\" >Three major theorems<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Data_is_important\" >Data is important<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Trading_Characteristics\" >Trading Characteristics<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#High_frequency_and_large_trading\" >High frequency and large trading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Trend_trading\" >Trend trading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Financial_products_involved\" >Financial products involved<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Quantitative_investing_is_indeed_interesting\"><\/span>Quantitative investing is indeed interesting<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"My_sharing\"><\/span>My sharing<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After recently re-reading some <a href=\"https:\/\/en.wikipedia.org\/wiki\/Value_investing#Quantitative_value_investing\" target=\"_blank\" rel=\"noreferrer noopener\">quantitative investment<\/a> books, I found that these quantitative investment teams have many common characteristics. In particular, the following two books are highly recommended by me. I suggest that readers who are interested in quantitative investment must find time to read them in detail several times:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.amazon.com\/Man-Who-Solved-Market-Revolution\/dp\/073521798X\" target=\"_blank\" rel=\"noreferrer noopener\">The Man Who Solved the Market<\/a>&#8220;: please see my post of &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/11\/book-by-jim-simons\/\" target=\"_blank\" rel=\"noreferrer noopener\">The quant&#8217;s must-read book for Jim Simons &#8220;The Man Who Solved the Market&#8221;<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.amazon.com\/Man-All-Markets-Street-Dealer\/dp\/1400067960\" target=\"_blank\" rel=\"noreferrer noopener\">A Man for All Markets<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Several_representives\"><\/span>Several representives<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Simmons&#8217; renaissance<\/li>\n\n\n\n<li>D.E. Shaw &amp;Co<\/li>\n\n\n\n<li>Long term capital management<\/li>\n\n\n\n<li>APT<\/li>\n\n\n\n<li>Bamberger<\/li>\n\n\n\n<li>Kepler<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Characteristics_of_team_members\"><\/span>Characteristics of team members<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Members_professional_diversity\"><\/span>Members\u2019 professional diversity<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Take the Renaissance Company founded by Simons as an example. Most of the company\u2019s members are Simons\u2019 colleagues or friends in the mathematics world, including experts in Markov chains, Bayesian mathematics, data analysis experts, cryptography experts, statistics experts, and computer science experts. Programming experts, speech recognition experts, data cleaning and integration experts, machine learning experts, economists, chemists, biologists, physicist consultants, etc.<\/p>\n\n\n\n<p>Each one requires a highly professional theoretical background and is a truly rare professional with specialized skills.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"All_are_smart_people\"><\/span>All are smart people<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>There are no exceptions for the members of the quantitative investment team. From the perspective of ordinary people, they are all extremely smart weirdos who are dedicated and motivated to work. They regard solving impossible problems as their goal.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Financial_background_does_not_matter\"><\/span>Financial background does not matter<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It doesn&#8217;t matter whether you have a financial background or not, but whether you have a smart mind determines whether you are suitable for quantitative investment. Because I don\u2019t have financial knowledge, as long as I study hard and find someone to help me, I will definitely be able to change my life. However, whether one is smart or not is not impossible to make up for through acquired learning.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Extremely_dependent_on_mathematics\"><\/span>Extremely dependent on mathematics<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"All_are_mathematicians\"><\/span>All are mathematicians<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The founders of famous quantitative investment teams, almost without exception, are all mathematicians. This is of course no coincidence.<\/p>\n\n\n\n<p>Examples of false types include Nash, who invented game theory, Shannon, the master of information theory, Thorpe, the first quantitative trading mathematician, Kelly, who invented the Kelly formula, and Simons, the most successful quantitative investor.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Model_is_the_foundation\"><\/span>Model is the foundation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>All quantitative investment teams have only one goal&#8211;to build a model that can sustainably make profits and be automatically operated by computers. What it relies on are mathematical models, algorithms, and market tests.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Three_major_theorems\"><\/span>Three major theorems<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>I found that most quantitative investment teams rely heavily on mathematical models. Among them, the three sets of Bayes theorem, statistical arbitrage, and regression testing are the most important. They almost constitute the core and necessary basic theorems of the quantitative investment team.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Data_is_important\"><\/span>Data is important<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>All models, statistics, three theorems, trading trends, and historical lessons require reliable data as a basis, otherwise everything will be in vain.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Trading_Characteristics\"><\/span>Trading Characteristics<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"High_frequency_and_large_trading\"><\/span>High frequency and large trading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Almost all quantitative investment teams use high-frequency and large-amount transactions; that is, trading a very large amount of financial products in a short period of time.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Trend_trading\"><\/span>Trend trading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Most quantitative investment teams use trend trading. They all believe that the trend is the trader&#8217;s friend. As long as the trading method they bet on can make a lot of money, they will increase the amount of bets on hand until the bet amount is large. Until the trend you bet on expires or you can no longer make money.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Financial_products_involved\"><\/span>Financial products involved<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The financial products involved include stocks, foreign exchange, commodities, precious metals, crude oil, futures, indices, stock options, bonds, etc.<\/p>\n\n\n\n<p>However, most quantitative trading is actually engaged in foreign exchange, commodities, precious metals, crude oil, futures, indices, and stock options that ordinary retail investors will not touch; that is, derivative financial products.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"178\" height=\"100\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2024\/06\/qt-Custom.jpg\" alt=\"Quantitative Investment\" class=\"wp-image-27477\"\/><figcaption class=\"wp-element-caption\">credit: Ideogram<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/07\/04\/quantitative-investment-com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Commonalities in Quantitative Investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/08\/11\/book-by-jim-simons\/\" target=\"_blank\" rel=\"noreferrer noopener\">The quant&#8217;s must-read book for Jim Simons &#8220;The Man Who Solved the Market&#8221;<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2024\/05\/11\/jim-simons-pass-away\/#google_vignette\" target=\"_blank\" rel=\"noreferrer noopener\">Jim Simons, the lord of quantitative investing<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/27\/imitating-fastest-effective\/\">Imitating great investors is the fastest and most effective way<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/05\/24\/investment-masters\/\">How to research successful investment masters?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/07\/10\/fund-size-and-roi\/\" target=\"_blank\" rel=\"noreferrer noopener\">The correlation between fund size and return on investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/01\/14\/irr-of-investment-masters\/\">The career annualized return on investment of top investment masters<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/05\/01\/john-maynard-keynes\/\">John Maynard Keynes, Investment master<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/07\/25\/stock-worth-holding-forever\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investors should care annualized rate of return (IRR), How to calculate?<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>If you want to enter the field of quantitative investment without having financial background, as long as you study hard and find someone to help you, you will be able to change your life. However, whether one is smart or not is not impossible to make up for through acquired learning.<\/p>\n","protected":false},"author":1,"featured_media":27477,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[73,72],"tags":[],"class_list":["post-27476","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-quantitative-investing","category-jim-simons"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/27476","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=27476"}],"version-history":[{"count":10,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/27476\/revisions"}],"predecessor-version":[{"id":29221,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/27476\/revisions\/29221"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/27477"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=27476"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=27476"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=27476"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}