Credit Suisse's Mauboussin: "We believe that some of the lessons of freestyle chess are useful...."
The quote goes on:
"...Properly done, a melding of fundamental and quantitative methods may
well yield better results than either of them on their own”
From ValueWalk:
Credit Suisse managing director Michal Mauboussin argues that freestyle
chess suggests a better way to combine quant and fundamental investment
strategies
It’s been a long time since humans have been able to hold a candle
against top chess programs, Kasparov famously lost to Deep Blue back in
1997 and amateurs have been losing to computers for even longer, but
that doesn’t mean that people have become obsolete. Freestyle teams,
which combine human and computer players, are still consistently better than machines playing on their own.
“We believe that some of the lessons of freestyle chess are useful.
Properly done, a melding of fundamental and quantitative methods may
well yield better results than either of them on their own,” write
Credit Suisse managing director Michael Mauboussin
and VP Dan Callahan in a September 10 report. “If we had to say which
camp had the most to gain from the other, we’d say that the fundamental
analysts have more to learn from the quants than the other way around.”
Process beats skill in freestyle chess
One of the early lessons from freestyle chess is that the skills
necessary to win change dramatically as soon as you bring a machine into
the mix. In 2005 Zackary Stephen and Steven Cramton, neither of whom is
a chess expert by ELO ranking, beat grandmaster Vladimir Dobrov and
another highly ranked player to win a freestyle tournament. Without
computer assistance Stephen and Cramton wouldn’t have had a prayer, so
what changed?
Stephen and Cramton were credited with having a better process that
let their different chess programs do the computational heavy lifting
and only interjected with human judgment
when those programs suggested different moves. Dobrov relied more on
his own (impressive) chess skills and didn’t make the most of the
software at his disposal.
Freestyle chess: parallel with fundamental and quantitative trading
The obvious parallel that Mauboussin and Callahan are trying to draw
is between fundamental and quant investment strategies, and they think
both sides of the cultural divide has something to learn from the other....MORE
