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The Quants Run Wall Street Now

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Re: The Quants Run Wall Street Now

#121

Post by nradov »

tptacek wrote: post #72
dluan wrote: post #65

My question for these new would-be quants is, how do you see your work? I know there are certain types of smart whizzes who see working for Google/Facebook/Amazon as some sort of intellectual step down, or where in finance the value to society is some handwavy "market-making" argument (depending on how philosophical you get), but presumably these types going into this are also tenure-track, research producing scienti…

There's nothing handwavy about the liquidity argument. Improving liquidity reduces the cost of trading for almost everyone in the market and thus makes almost everyone just a little wealthier. That means ordinary people, like schoolteachers and custodians, retire with a bit more money, and are a bit more comfortable; it means lots of people can donate just a bit more money to charitable causes without crossing whatev…

No one disputes the quantitative benefits of increasing liquidity. But I've yet to see it quantified in a mathematically rigorous way. Are the speculators and active traders actually generating more value for society as a whole then they're syphoning off? (That's an honest question, I'd really like to know.)

Re: The Quants Run Wall Street Now

#122

Post by avn2109 »

dsacco wrote: post #96
SirLJ wrote: post #87

Earlier quoted context omitted.

Please, if you'd like to help the community, just share a good data source... I would never share my winning strategy with some "know it all" on a public forum :-)

It doesn't need to be your actual strategy, whatever. I have no desire to "steal" whatever your system is. What I am trying to demonstrate here is that your strategy can perform significantly differently if it is using data on different time resolutions. If you find an inefficiency that can be traded by analyzing snapshot data at 1 minute bars, that might turn out to be nothing at all when you look at the tick data.…

It's super unclear why this is downvoted, seems to me like he has an entirely valid point about strong dependence on the time resolution of data.

Re: The Quants Run Wall Street Now

#123

Post by bmpafa »

tptacek wrote: post #72
dluan wrote: post #65

My question for these new would-be quants is, how do you see your work? I know there are certain types of smart whizzes who see working for Google/Facebook/Amazon as some sort of intellectual step down, or where in finance the value to society is some handwavy "market-making" argument (depending on how philosophical you get), but presumably these types going into this are also tenure-track, research producing scienti…

There's nothing handwavy about the liquidity argument. Improving liquidity reduces the cost of trading for almost everyone in the market and thus makes almost everyone just a little wealthier. That means ordinary people, like schoolteachers and custodians, retire with a bit more money, and are a bit more comfortable; it means lots of people can donate just a bit more money to charitable causes without crossing whatev…

I think that, in terms of social value, the point of diminishing returns for market making and liquidity has long since passed, especially wrt social value for Avg. Joes & Janes.

I def. don't hold Facebook etc in a much higher regard here, but if we're talking about brain drain from socially useful fields, I don't think anyone can credibly argue that finance (esp. HFT et al) provides any meaningful social value.

In fact I'll go one further: by sucking up the best and brightest, high finance is doing a net harm to more socially useful sectors.

I'm not being prescriptive wrt what choices people should make, btw, just speaking in terms of social good.

Re: The Quants Run Wall Street Now

#124

Post by canoebuilder »

xapata wrote: post #111
T-A wrote: post #77

Earlier quoted context omitted.

> Anyone have hard numbers on if/by how much quants outperform old fashioned techniques From the article, "In the past five years, quant-focused hedge funds gained about 5.1% a year on average. The average hedge fund rose 4.3% a year in the same period."

Averages are nearly meaningless without standard deviation or at least a histogram.

Meaningless for telling us the distribution of returns across all hedge funds.(It is very likely a Pareto distribution with, or even more skewed, with a small percentage of funds making the majority of returns.)

Interestingly, what these averages do tell us is that the average hedge fund return is not much, if at all, better than the average index fund return, with the index fund return graph being much more uniform in variance.

Re: The Quants Run Wall Street Now

#125

Post by yourapostasy »

dsacco wrote: post #81
yourapostasy wrote: post #54

Earlier quoted context omitted.

Why isn't this data out on torrents? Is it somehow copyrighted?

There are a few reasons. 1. Almost all buyers are institutional funds or individuals with the means to trade as well-informed investors. To put it succinctly, they're in it as serious business, because it's incredibly expensive. They have no incentive to make the edge they just purchased for five - six figures public. 2. These vendors go to various lengths to protect the data, including steganographic "trap streets"…

Sorry, I should have clarified my question. Why aren't the exchanges themselves publishing the data onto torrents?

My layman's understanding is the more actors that participate on the exchanges, the more volume, the more the exchanges profit. If this is true, then making the historical trading data would encourage more entrants onto the exchanges, and the exchanges would earn far more than selling the data to a few large institutions.

Re: The Quants Run Wall Street Now

#126

Post by nradov »

nullnilvoid wrote: post #118
nradov wrote: post #114

Earlier quoted context omitted.

This is ridiculous. Poor people aren't going to get rich by day trading on 2x margin. And if someone in the US seriously wants to get into margin trading it's not that tough to scrape together $25k by getting a second job and living frugally for a couple years. Also if you have decent credit you can simply take out an unsecured personal loan for $25k and deposit that in your trading account. This is effectively the s…

Why do the poor have to get a second job in order to get 2x margin? Why do they have to jump through the hoop when the rich don't have to? If the poor have $2,000, why cannot they use margin as leverage? The opportunities are not equal there.

Why is life not perfectly fair for everyone?

If the margin trading limit was lower then the news would be full of sob stories about how greedy brokerages let unsophisticated people get in over their heads and then took their life's savings on a margin call. Sometimes stocks go down.

Re: The Quants Run Wall Street Now

#127

Post by dsacco »

SirLJ wrote: post #104
dsacco wrote: post #96

Earlier quoted context omitted.

It doesn't need to be your actual strategy, whatever. I have no desire to "steal" whatever your system is. What I am trying to demonstrate here is that your strategy can perform significantly differently if it is using data on different time resolutions. If you find an inefficiency that can be traded by analyzing snapshot data at 1 minute bars, that might turn out to be nothing at all when you look at the tick data.…

Thanks,but you don't have to prove anything to me... my trading account is my proof that I don't have to compete with the flash boys to make money, so I don't care about tick data...

Alright, could you help me understand what type of data it is that you purchased from ebay? And what type of strategy you're using, at the highest level? Are you trading equities? Derivatives? Can you at least tell me how long you typically hold a position?

I'm not interested in your actual strategy, I just want to understand what you're doing categorically to see if there's any way it can possibly work instead of being attributable to a bull market. You should be able to talk about the type of strategy this is without discussing the actual signal(s) key to the strategy. This is just becoming kafkaesque for me. I'm legitimately shocked no one else has asked you about this just out of basic curiosity about how you arrived at your current methodology. You mentioned Flash Boys and tick data...but HFT is not the only paradigm for which you'd use tick data.

I'm trying to give you the benefit of the doubt here but from my experience none of what you're doing makes sense. You have to understand that the reason I'm giving you so much flak for this is because you're repeatedly recommending people buy financial data from ebay, you're being cagey about why your recommendation is sound, and your recommendation is utterly alien to the way in which people professionally trade using historical data.

If your data from ebay is actually, somehow reliable, then fine; but if it isn't, recommending it for people who are looking for actionable data is irresponsible.

Re: The Quants Run Wall Street Now

#128

Post by bubblethink »

nradov wrote: post #117
seibelj wrote: post #63

Earlier quoted context omitted.

I don't do this, but there is a place without any rules, 24/7 trading, wild volatility, and tons of dumb money. This place is cryptocurrencies. Supposedly it's a lot easier to trade in these markets, less competition, less money needed. I used to laugh at my brother, but he turned $20k into $300k, so it is possible.

Some people also turn $20k into $300k by playing the lottery.

Well, crypto markets have much better odds than the lottery right now. Even without understanding the nitty gritties, if you just diversify in the top 10-20ish coins, and set sensible stop losses, you are in a very good position to come out ahead.

Re: The Quants Run Wall Street Now

#129

Post by matheweis »

mrkgnao wrote: post #112
tzs wrote: post #62

Earlier quoted context omitted.

If you are going to use machine learning on the data, though, make sure you know what you are doing unless you are just using someone else's complete package. It's really easy to screw up machine learning. I recall an example given in a class I took. (I may be misremembering the details, though). Some people were trying to apply machine learning to currency trading. They had a bunch of data. They normalized the data…

Without a minute understanding of what's involved, I'd guess that normalizing is a non-local operation, in the sense that the effect of normalizing some x depends on the other elements of your dataset, so that normalization includes the "information" of the rest of the data implicitly. In real life, that's sort of like having access to the answers when you're given the questions. Being trained in that environment won…

I think you've got it. The part about normalization across the entire dataset implicitly including information is by definition true (it contains, at a minimum the true min/max). Can't speak to the rest, though, as I'm still learning myself... :)

Re: The Quants Run Wall Street Now

#130

Post by nl »

nullnilvoid wrote: post #101
zackmorris wrote: post #48

Anyone have hard numbers on if/by how much quants outperform old fashioned techniques like flags and finding stocks that tend to go the opposite direction from the one you're interested in? I don't know the terminology for all this but I know there are limits due to uncertainty so even the best algorithms may not do much better that someone guessing. Do quants do 10% better, 2x better, 10x better? My Dad and I had a…

> I wanted to try day trading myself but they changed the law in 2001 so you had to have $25,000 to trade on margin, so only the wealthy could get twice the gains: https://en.wikipedia.org/wiki/Pattern_day_trader This is how the rich get richer and the poor get poorer. The rich can trade on margin, pay less tax (capital gain tax is lower than even income tax), and have many more other opportunities. The middle class…

The alternative reading of that is that the rich can afford to lose more.

I'd note that the OP lost all their gains and ended up breaking even - and that was with their father stopping them shorting.

If they had been short they could easily have been ruined.

Asking people to have a $25K buffer before they start gambling isn't entirely an unjustifiable idea.

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