The rise, fall and rise of the quants

Quantitative analysis (quantitative news) is the subject of a new book that's benefiting at least from sheer topicality. It's no secret that Wall Street was smitten with this new, modern approach to technical analysis. It seemed almost passé until a new breed of math geek took over.

In "The Quants, How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed it," Wall Street Journal reporter Scott Patterson aims for a much needed in-depth picture of the quantitative movement, backgrounding us on the pioneers--a group that includes some colorful characters, such as Ed Thorp, whose biggest-selling books are "Beat the Dealer" and "Beat the Market." 

In search of the truth, these guys got all of Wall Street to buy in, but the elegance of their models was no match for reality. Thorp would argue that they got greedy and violated the basic principles he set forth (like not betting too much). But my sense is that the quantitative movement is keeping pace. Recent developments, the rise of dark pools (dark pool news) and high frequency trading (high frequency trading news), are tailor made for what they do, allowing them to profit from even tiny opportunities. We'll just have to see where all this leads. You do have to wonder how much fundamental analysis matters these days? 

For more:
- here's a New York Times review   
- here's a Business Week review

Related Articles:
Are the quants to blame?
How the quants really feel
Have the quants messed up the risk models?

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