Thursday, April 16, 2009

Quants Remain Clueless

The quants may be in for some explosive losses

Here's the latest disaster report on the quants via a note released yesterday by Barclays Capital:
The recent market rally that started on March 10th has been dramatic, unexpected, and actually quite painful for the vast majority of quantitative equity managers. Based on our conversations with numerous managers in recent weeks, we believe that most quantitative managers’ portfolios were not positioned in expectation of a rally. Of the nearly 80 managers we have talked to, only one manager said they were up since March 9th and the clear majority admitted to being notably down or stopped out on their positions. These managers were both long-only and long-short quant managers using market neutral and non-market neutral strategies, sector neutral and non-sector neutral strategies, longer term and intermediate term holding periods. It is fair to say that just about everyone is bewildered and trying to understand when this rally will end.
Note Barclay's analysis of the market isn't much better. The note author is simply a trend follower, who expects pullbacks from the trend. No analysis of what causes the trends.

Repeat after me. Econometrics is useless. Econometrics is useless.

The economy can't be modeled simply with equations.For equations you need constants, there are no constants in human action.

HT2zerohedge via NoAxe.

No comments:

Post a Comment