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I hate reading comments like this. They’re intellectually lazy and overly cynical. The industry is not a fraud. Yes, shady things happen. But there’s a lot of l

I hate reading comments like this. They’re intellectually lazy and overly cynical. The industry is not a fraud. Yes, shady things happen. But there’s a lot of legitimate research done by capable people. I used to do research in this industry and I can tell you that, actually, there are a lot of opportunities for novel research based on huge financial details which haven’t been noticed. What is your experience, that you write off my own experience as well as entire industry, as being illegitimate? Based on another comment you made in this thread it looks like you’ve also worked in the industry, so did you seriously never come across legitimate research efforts or are you just not mentioning those?

crimsonalucard 7y ago
His viewpoint is just as valid as yours. Both viewpoints are anecdotal and therefore both could be a different aspect of the truth. I don't like how his comment got flagged. It's almost like burying a whistleblower.
corporateslave5 7y ago
I worked on a quant research team at a well known fund. Without going more into details, I grew up around people making 20 million a year at funds. The real money is made when a ceo tells you how the new company innovations and business lines are coming along. The long term bets on companies is where big money is made. Flipping stocks all day at the alt data/quant funds is overrated and a race to the bottom. When everyone has the same data it’s worth nothing. These places are doing well now because markets are booming, even a turkey can fly in a tornado. Don’t get confused
- throwawaymath 7y ago
  The top quant funds perform exceptionally well even through bear markets. That's a fact and a matter of public record. Likewise the funds which rely on alternative data the most aren't even primarily quantitative in their strategies, so you shouldn't be grouping them together. I don't know where you worked, but please stop perpetuating the myth that everything in finance is shady business in smoky rooms. Contrary to what you're saying, a lot of the alpha generated at the best firms comes from novel approaches to data analysis, not the uniqueness of the data itself. There is real ingenuity in research which translates into consistent alpha. I'm not going to argue it's literally the maximally valuable way to generate returns in finance, but you're dismissing it entirely. Not everything in trading is relationship building and trying to curate data no one else has. There is room to combine otherwise public datasets together to find novel insights, and this is frequently done.
  - gamblor956 7y ago
    The top quant firms also get a fair amount of internal corporate data that lets them properly populate their models. Every model has significant biases and weaknesses. If a model survives more than one up or down cycle, it's generally a sign that the model is based on leaked data and not on the actual analytic prowress of the firm involved.
    - throwawaymath 7y ago
      Sure, individual models are transitory and don't last very long (relatively speaking). But I'm also not debating that point.
  - throwno 7y ago
    >The top quant funds perform exceptionally well even through bear markets. Oh, you mean like LTCM?
    - throwawaymath 7y ago
      No, I mean places like RenTech and TGS. But I'll humor your implied point: LCTM's failings have nothing to do with the core thesis I'm rebutting, which is that the only value in financial trading is provided by shady backroom dealings.
      - throwno 7y ago
        I'm not as cynical as that guy. I don't think quants are a "scam" or whatever. However, I do think the the top funds represent survivorship bias. Everybody's a top fund, until they aren't. As for RenTech, the fact that Simons stepped down in 2008 says maybe things weren't all so rosy behind closed doors.
        auntienomen 7y ago
        You're suggesting that Simons was forced out? By who? He owns the company.
gamblor956 7y ago
Speaking as a former corporate lawyer...he's not wrong. Executives have been leaking internal data to trading firms for decades. The trick is for the analyst to come up with some plausible explanation for why they reached the conclusion to buy (or sell), which is generally easy to do.
- throwawaymath 7y ago
  Sure, but you're not describing the way hypotheses are developed at DE Shaw, PDT, etc. I'm not debating that happens at places which focus (even if only ostensibly) on fundamental analysis.
- kneel 7y ago
  Actually illegal. Practically impossible to prove! Great job wall street! Thanks for all your valuable contributions to humanity.
smt88 7y ago
> The industry is not a fraud. > there are a lot of opportunities for novel research These are not mutually exclusive. When presented with the opportunity to do either insider trading (and easily getting away with it) or paying for novel research, which will most managers choose? Why not choose both? > What is your experience, that you write off my own experience as well as entire industry, as being illegitimate? You hardly need this one person's data point. The massive success of passive investing is all the evidence anyone needs. (I also worked in Wall Street just before and during the financial crisis, and my experience is consistent with the industry being more fraud than not fraud. I absolutely am not implying that you yourself didn't produce value or that no one is honest, but value/honesty are not the norm.)

crimsonalucard 7y ago

His viewpoint is just as valid as yours. Both viewpoints are anecdotal and therefore both could be a different aspect of the truth. I don't like how his comment got flagged. It's almost like burying a whistleblower.

corporateslave5 7y ago

I worked on a quant research team at a well known fund. Without going more into details, I grew up around people making 20 million a year at funds. The real money is made when a ceo tells you how the new company innovations and business lines are coming along. The long term bets on companies is where big money is made. Flipping stocks all day at the alt data/quant funds is overrated and a race to the bottom. When everyone has the same data it’s worth nothing. These places are doing well now because markets are booming, even a turkey can fly in a tornado. Don’t get confused

throwawaymath 7y ago
The top quant funds perform exceptionally well even through bear markets. That's a fact and a matter of public record. Likewise the funds which rely on alternative data the most aren't even primarily quantitative in their strategies, so you shouldn't be grouping them together. I don't know where you worked, but please stop perpetuating the myth that everything in finance is shady business in smoky rooms. Contrary to what you're saying, a lot of the alpha generated at the best firms comes from novel approaches to data analysis, not the uniqueness of the data itself. There is real ingenuity in research which translates into consistent alpha. I'm not going to argue it's literally the maximally valuable way to generate returns in finance, but you're dismissing it entirely. Not everything in trading is relationship building and trying to curate data no one else has. There is room to combine otherwise public datasets together to find novel insights, and this is frequently done.
- gamblor956 7y ago
  The top quant firms also get a fair amount of internal corporate data that lets them properly populate their models. Every model has significant biases and weaknesses. If a model survives more than one up or down cycle, it's generally a sign that the model is based on leaked data and not on the actual analytic prowress of the firm involved.
  - throwawaymath 7y ago
    Sure, individual models are transitory and don't last very long (relatively speaking). But I'm also not debating that point.
- throwno 7y ago
  >The top quant funds perform exceptionally well even through bear markets. Oh, you mean like LTCM?
  - throwawaymath 7y ago
    No, I mean places like RenTech and TGS. But I'll humor your implied point: LCTM's failings have nothing to do with the core thesis I'm rebutting, which is that the only value in financial trading is provided by shady backroom dealings.
    - throwno 7y ago
      I'm not as cynical as that guy. I don't think quants are a "scam" or whatever. However, I do think the the top funds represent survivorship bias. Everybody's a top fund, until they aren't. As for RenTech, the fact that Simons stepped down in 2008 says maybe things weren't all so rosy behind closed doors.
      - auntienomen 7y ago
        You're suggesting that Simons was forced out? By who? He owns the company.

gamblor956 7y ago

Speaking as a former corporate lawyer...he's not wrong. Executives have been leaking internal data to trading firms for decades. The trick is for the analyst to come up with some plausible explanation for why they reached the conclusion to buy (or sell), which is generally easy to do.

throwawaymath 7y ago
Sure, but you're not describing the way hypotheses are developed at DE Shaw, PDT, etc. I'm not debating that happens at places which focus (even if only ostensibly) on fundamental analysis.
kneel 7y ago
Actually illegal. Practically impossible to prove! Great job wall street! Thanks for all your valuable contributions to humanity.

smt88 7y ago

> The industry is not a fraud. > there are a lot of opportunities for novel research These are not mutually exclusive. When presented with the opportunity to do either insider trading (and easily getting away with it) or paying for novel research, which will most managers choose? Why not choose both? > What is your experience, that you write off my own experience as well as entire industry, as being illegitimate? You hardly need this one person's data point. The massive success of passive investing is all the evidence anyone needs. (I also worked in Wall Street just before and during the financial crisis, and my experience is consistent with the industry being more fraud than not fraud. I absolutely am not implying that you yourself didn't produce value or that no one is honest, but value/honesty are not the norm.)