By 
With little to invest in and most of the things that have been taken over by the US government, in January, two analysts from ING Investment Management’s quantitative group in New York combined their research and modeling expertise to hatch a diabolical plan: attack all subway stations in Manhattan. in less than 24 hours.
Hedge fund analyst Matt Ferrisi and quantitative analyst Chris Solarz collected notoriously flawed information on the MTA schedule, performed regression analysis, considered trillions of combinations and possibilities with sophisticated software, and ultimately mapped out a route that would cover all 468 stops. in 22 hours and 45 minutes. And deliver them to Grand Central Station for a full day of work. Result: Precisely 22 hours and 51 minutes later, the watery-eyed duo climbed onto the platform and headed for Park Avenue, winners and new Guinness World Record holders.
Lesson, all IROs wonder what this has to do, in the name of socialism, with the trading of their shares. Well, 2009 is destined to be a good year for quant investors. Why? Quantitative models work best for managing risk in unpredictable markets. Despite stories of destruction, several high-profile quant investment stores made big returns in 2008, including Renaissance Technologies, up to 80%. What has changed in 2009? Market rationality and efficiency remain unsubstantiated rumors, the economic outlook is bleak, and central banks are enthralled with the banking world’s Wii, “quantitative easing” (more on that another day). These conditions represent the kind of environment in which quanta who trace the shortest route through a great maze of variables, a la Ferrisi and Solarz, could thrive.
So what to do? Raise your IR Cold Ratio one notch by learning more about quantitative trading. You already know: knowledge is power. For example, in this week’s link below, you can read about ING’s vision (as we chose their entrepreneurial analysts today) of quantitative markets and how the company maps sentiment, quality and value of the market to build a vision of opportunity.
Right now, with the exception of stronger-than-expected trading today (March 31), we are not surprised by market activity and expect the money to move from stocks to other spread opportunities in April. However, as ING points out, markets always return to fundamentals at some point. The fewer government subway stops between removing debris and finding value, the faster we’ll get there.