Tuesday, May 20, 2008

Quants Lose that Old Black (Box) Magic

From Dow Jones:

Quantitative fund managers, who use computer models rather than human judgment to pick stocks, have continued to suffer since the credit crisis threw their calculations into confusion last summer.

They are fighting back with new models and new ideas, but are running into investor skepticism.

Three quarters of fund managers—quant and non-quant alike—agree the outlook for computer models is troubled.

It will be difficult for them to generate returns because they are all following similar market factors, according to a study last week from the CFA Institute, a trade body for fund managers.

Managers are responding in three ways, often in combination, the study found....MORE

HT: Fintag