A terrible, horrible, no-good year for quants

Quant have had a bad year. One of their core factor, value, a staple of investment for many years, has strongly underperformed.

Quants rely on backtests to see what has performed / is performing well. In a changing universe, models naturally have short lifetimes as a result. In this world, the past really doesn’t reflect the future anymore, and many models do not work at all. Some quants have self-doubt on the validity of their approach (see the previous post on Inigo Fraser Jenkins).

It’s probably way too early to call for the demise of quant , but COVID surely brings a regime shift.

Credits to Robin Wigglesworthat Financial Times

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Written by Gontran de Quillacq

Gontran de Quillacq is an expert witness and a legal consultant. He is a recognized authority in options, trading, derivatives, structured products, portfolio management, hedge funds, mathematical finance, quantitative investment, strategy research and financial markets in general.

November 3, 2020

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