11.4. QUANTS ARE ALL THE SAME

This argument, too, has been widely held to be true, particularly in the wake of the disastrous performance of many quants in August 2007. However, it is a patently false claim, and this I can state with both vehemence and certainty. We will focus again on both theoretical and empirical evidence of this truth, starting with the former.

This book has outlined many of the kinds of decisions each quant must make in the process of building a quant strategy. These decisions include the kinds of instruments and asset classes to trade, the sources of data one will use and how these should be cleaned, ways to research and develop trading strategies, the kinds of phenomena are being traded, how these phenomena are specified, ways in which various forecasts are combined, how far into the future forecasts are being made, how bets are structured, ways in which risk is defined and managed, how transactions costs are modeled, how portfolios are constructed, and how trades are executed. The number of degrees of freedom for a quant in building a trading strategy is, in other words, very large. Though the kinds of phenomena are not very numerous, all the other considerations are ways the quant can differentiate his approach from those of others who are ostensibly looking for the same types of anomalies. Depending on the time horizon of the strategy and number of positions it takes, the number of trades per year can easily get into the millions. I know many traders ...

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