The stockmarket is now run by computers, algorithms and passive managers
Monday, November 11th, 2019QT:{{”
“Jump to 2017, when Google unveiled AlphaZero, a computer that had been given the rules of chess and then taught itself how to play. It took four hours of training to be able to beat Stockfish, the best chess machine programmed with human tactics. Intriguingly, AlphaZero made what looked like blunders to human eyes. For example, in the middlegame it sacrificed a bishop for a strategic advantage that became clear only much later.
Quant funds can be divided into two groups: those like Stockfish, which use machines to mimic human strategies; and those like AlphaZero, which create strategies themselves. For 30 years
quantitative investing started with a hypothesis, says a quant investor. Investors would test it against historical data and make a judgment as to whether it would continue to be useful. Now the order has been reversed. “We start with the data and look for a hypothesis,” he says.”
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