Attempting to get a high level understanding of the role that quantitative finance plays in the financial global markets. Open to any suggestion on how to do this, but figure a starting point might be to estimate the percents of earnings and losses globally on an annual basis attributed to quantitative finance.
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3 Answers
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This answers a slightly larger question than you're asking, but I highly recommend "An Engine, Not a Camera: How Financial Models Shape Markets" by Donald MacKenzie, which is part of the burgeoning field of "Social Studies of Finance". Some relevant links:
Regarding your specific question: you would need to start by defining "quantitative finance" in this context. Does it include any derivative trading (for instance)? What about index funds (they were based on the insights from CAPM, after all)? Or do you just want to limit it to things like quantitative hedge funds?
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$\begingroup$ +1 @Shane: Thanks for suggesting MacKenzie's book! -- In terms of defining "quantitative finance", while this may be frustrating to hear, I've found that defining a term based on my own understanding regardless of how familiar with it's use I am to be limiting. I find it of more use, especially within the stackexchange sites to let the user providing the answer determine what context best fits the information they have to provide. No answer is perfect, and everyone has a different point of view on the meaning of a term. In this case, I'd lean towards a more open understanding of it's meaning. $\endgroup$– blundersCommented Apr 9, 2011 at 18:32
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I have attended a number of conferences, and the percentage of asset under management by quantitative funds is consistently quoted between 17% and 23%; these statistics are usually based on aggregates from eVestments, SEC, and European stop that, like Frankfurt, ask the sender of an order to specify the way it was created. It is likely that the percentage may have decreased in the past two years. This is not the percentage of flows, and for sure not PnL. Not sure there are any reliable data in that respect.
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$\begingroup$ +1 @gappy: Thanks - so, any suggestions for finding sources for the assets under management using quant quoted to be "between 17% and 23%"? $\endgroup$– blundersCommented Apr 18, 2011 at 11:47
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If it wasn't quant it would be something else. I rather think that the effect is due to real time which can allow manipulation more easily and so huge moves. In fact a Nobel Economist Maurice Allay did advocate to forbid real time and one quotation per day if the goal was to stabilize the effect of stock market on Economy.
But of course no way that will ever happen since the rules are aimed not to stabilize but to create as much volatility as possible since it is how the big guys can profit.
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$\begingroup$ +1 @user763: "one quotation per day" to whom on what? In terms of real time versus delayed trading, long-term I'm guessing that that would lead to more loses and even more volatility, since it would lead to the pooling trades. If anything, the more liquid the markets the better; or at least that's my opinion. Also, when you say "quant it would be something else" do you mean in name, or something else? $\endgroup$– blundersCommented Apr 18, 2011 at 11:49