I have a strong statistical background (particularly in Time Series analysis) and previously have spent a lot of time modelling sports, Baseball in particular. After reading "Analysis of Financial Time Series" by Ruey S. Tsay, I have become interested in quantitative finance.
I'd like to know the mentality that quants have when it comes to the stock market. What I mean by this is what is the general idea to be successful. I'm not asking exactly HOW to do it but merely what to focus on. For example to be successful with Baseball modelling I focused on predicting the distribution of competing teams' runs.
I saw a comment here by Matt Wolf
If I have to summarize my take on financial markets then I would say success has everything to do with managing risk in smart ways as well as seizing opportunities in times of market inefficiencies and it has very little to nothing to do with forecasting the future.
I understand that risk must be managed in smart ways and clearly to make any sort of expected profit, the only way to do this is to capitalise on market inefficiencies. However I do not get the part to do with forecasting the future. Surely this is necessary! Does it mean that success is not about POINT forecasts of the future but instead distributional forecasts e.g. option pricing seems all about distributional forecasting.
What I took away from it was that you shouldn't try to predict stock movements by some ARMA, ARIMA or a more general dependency equation or have I completely missed the point?