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Introduction to Quantitative Investment and Quant Fund Business Globally
Pages 12 (3012 words)
Quantitative investment bases it philosophy on two types of investment strategies, which are passive investment management and active investment management. Under the passive investment management, the efficient market hypothesis is one of the major market scenarios that offers…
Quantitative investments are also considered when based on a passive investment management. Under the passive investment management, behavioural finance assumptions are considered to be the main characteristic of the market. Under behavioural finance, the assumptions made incudes existence of market inefficiencies, making of rational decisions by the investors and existence of long-term stable investing opportunities.
The above equation is used to show how alpha can be maximised in a market by improvement of the investment skills (High IC), creation of a better opportunity (high investment breadth) and finding of better business environment (high volatility).
An investment can be measured in terms of the breadth and depth. When using breadth as the means to measure an investment one will consider the number of shares acquired by a particular investment strategy and the specific turnover of the portfolio (Shawn 6).
Fundamental investments are considered to have a high investment depth and low investment breadth. Quantitative investment is the opposite of the fundamental investments. They have a low investment depth(IC) and a high investment breadth.
A quant fund structure is made up of many partners who ranges from administrators, auditors, registrar and transfer agents, legal advisor, custodian, investment advisors, investment manager, prime brokers, executing brokers, partners, sponsors and a board of directors.
Quant fund structure relies heavily on data and technology. Quant fund investment procedure involves four steps which are data collection and cleaning, strategy model construction and back testing, grouping of strategies and portfolio optimization and finally paper trading and lives trading with risk control.
The following areas, which were addressed by the speaker, are the major ones, which need to be ...
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