Quantitative OR Fundamental Research Process??

Water Cooler Investing
#1

Hi there!!

I have been interesting with quantitative equity strategies these days, which essentially are factor investing! But I found that the performance for those quant funds are not as attractive as it sounds like! In this field, managers like AQR,GMO or LSV, use quant process to select equities, and the performances are actually not as great as what I have thought!!

And there are a ton of emperical research in cross-section stock returns, and shows that what % of alpha can be created if portfolios are contructed in those factors!! However, to my knowledge, I dont see those type of alphas in their actual portfolios! I understand that those research do not take trading cost into their considerations! However, I dont believe that trading cost is the main factor that drill down those alphas!

I guess my questions is : for those who are involved in those quant factor investment, can you help point me out any investment managers who utilize a quant driven research process and have world class performance tracking? thanks

#2

Actually, I am looking for this myself. If you happen to stumble across outstanding quant strategies that nobody else knows about, please let me know about them here.

#3

If someone found something like that he/she would not tell you about it (neither would I). Factor investing is only profitable for a little while until the market has caught up. This might interest you though: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2249314

#4

I agree, please publicly share your outstanding quant strategies that no one at RenTech or DE Shaw or AQR has thought of yet, I would really appreciate that and will buy you a beer in return.

#5

Yeah man, I know that…I uh…you know…uh…gosh – now its awkward – was trying to make a joke.

#6

Why are you yelling!!! So you don’t think quant strategies are attractive yet you want more info on them? Ok. Fwiw, here’s my take - most back tests that are historically awesome looking don’t work, so basic factor strats shouldn’t either. That doesn’t negate the value of looking at the info and understanding why it doesn’t work or how it could potentially apply in the future. I’m also pretty sure AQR realizes they should take transaction costs into effect…and yes stuff is generally efficient to the level of transaction costs, which makes sense otherwise nobody would invest in scale or infrastructure.