Nerds on Wall Street: Math, Machines, and Wired Markets

8.12. Notes

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^[] A good starting point for genetic algorithms is ILLIGAL, the GA lab at the University of Illinois (www.illigal.uiuc.edu/web/). For genetic programming, John Koza's work is found here: www.genetic-programming.org/. The Santa Fe Institute, where many of these ideas first got started, is still in the game: www.santafe.edu/research/topics-innovation-evolutionary-systems.php.

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^[] There are videos of some these early examples accompanying John Koza's books, Genetic Computation I and II (Cambridge, MA: MIT Press). A search for "genetic algorithm demonstrations" turns up hundreds.

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^[] First Quadrant (www.firstquadrant.com), in Pasadena, California. Assets under management were in excess of $20 billion; clients were primarily pension funds.

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^[] Thanks to Andy Lo of MIT for this clear view of the central issues, discussed in many other contexts in his fine text Econometrics of Financial Markets (written with John Y. Campbell and A. Craig MacKinlay; Princeton University Press, 1996) and popular work A Non-Random Walk Down Wall Street (written with A. Craig MacKinlay; Princeton University Press, 1999).

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^[] Actually, just the variable specification portion; as will be discussed later, the first two segments were fixed.

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^[] Using the formula n!/[(n – r)!r!] and recognizing that there are 192 variations on each variable.

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^[] For information on these models, see "A Disciplined Approach to Global Asset Allocation," by Robert D. Arnott and Robert M. Lovell, Jr., Financial ...