9 votes
Accepted

Making a beeline to statistical arbitrage

I get this question frequently from academic types, and happily for you, the path does not involve any of those books. The major gaps in your knowledge, from the point of view of statistical arbitrage,...
Brian B's user avatar
  • 14.7k
6 votes
Accepted

What are some quantitative trading strategies used by high-frequency trading companies to make a killing on a market crash day on 24Aug2015?

On aggregate, large shops like Virtu are involved in market making strategies. There's various classes of market making strategies, and it is unnecessary to distinguish further here for the purpose of ...
madilyn's user avatar
  • 5,230
6 votes

Insoluble Enigma

Your question is too broad to give anything but a very general answer. Data mining in the raw form won't do any good. At the minimum, you will pick up thousands of spurious correlations. You cannot ...
Dave Harris's user avatar
  • 4,379
5 votes

Stress Testing approaches at Pension Funds/Asset Management companies

Many long term investors use historical events and the market moves associated with such events to stress test their portfolios. For example, they use the dot-com bust, the latest "great recession", ...
AlRacoon's user avatar
  • 6,252
5 votes
Accepted

What is the industry standard way of calculating and annualizing performance metrics?

To give you an idea of industry standards for funds (although not hedge-fund specific), Morningstar and Trustnet both use monthly returns and annualize their data. See, for an example plucked at ...
Tim Wilding's user avatar
  • 1,396
5 votes
Accepted

How much money would it take to artificially inflate/depress a stock?

Actually the recent work by Koijen and Gabaix tries to tackle precisely a similar question. They do not have a paper yet. Here's the link: https://www.youtube.com/watch?v=apCxV8zxoOc They find that ...
phdstudent's user avatar
  • 8,143
5 votes
Accepted

Do passive ETF fund managers care about profolio metric such sharpe ratios and sortino ratio?

Portfolio risk metrics matter a lot for all fund managers. Though certain type fund vehicles can have completely different sets of performance metrics. It's hard to imagine a Venture Fund analyzing ...
Desmond830's user avatar
5 votes

Do passive ETF fund managers care about profolio metric such sharpe ratios and sortino ratio?

The Sharpe ratio and the Sortino ratio are not under the control of the ETF managers, they will be equal (or very close) to the ratios for the Index that the ETF tracks. There is not much room for ...
nbbo2's user avatar
  • 11.2k
3 votes

Who benefits from more fair market?

You might find this paper interesting: "Does Finance Benefit Society?" It's a very complicated question and in my opinion the above paper provides a nuanced answer.
beeba's user avatar
  • 1,074
3 votes
Accepted

quant software for trading, one in all or pretty close to that

Indeed, hedge funds don't use platforms like Metatrader. Normally they use a customized solution where funds can have various requirements relating to its reporting, trading style, company ...
epsimatic88's user avatar
3 votes

Where can I see audited financial statements of Renaissance Technologies?

Renaissance is a private company and is not obliged to provide a copy of its financials to anybody outside of regulators, if they are so required. Some hedge funds do provide their audited financials ...
AlRacoon's user avatar
  • 6,252
3 votes
Accepted

Disadvantages of large panel

In general, more data is better than less data. On the topic of your specific scenario, you want to cluster by date or use some other procedure to produce consistent standard errors in the presence ...
Matthew Gunn's user avatar
  • 6,934
3 votes

Calculating the allocation of a fund given two correlated variables

A good method for getting the proportions would be to use Sharpe's returns-based style analysis. Style Analysis is a constrained regression. Regress the returns of the fund against the two underlying ...
Tim Wilding's user avatar
  • 1,396
3 votes

How do funds assess fees to investors?

It will typically be on the net asset value (NAV) of the fund, which has a precise definition, and in your hypothetical case, is around the $10M value. The long answer is: it depends on how it's ...
databento's user avatar
  • 2,468
2 votes

What is broker neutral trading system?Can I use leverage if using broker neutral EMS?

What really means broker neutral trading system? It means that you can have one piece of trading software that executes your trades and routes them to one or more brokers (with whom you have accounts,...
amdopt's user avatar
  • 4,738
2 votes

How do I officially track the performance of my quant strategy? Do I need to be GIPS compliant for my performance to be legitimate?

Put your 100k in an account. Do not run any other strategy in the account. Run the account the same exact way you would run investor capital--same leverage, same risk parameters, same products, etc. ...
amdopt's user avatar
  • 4,738
2 votes

Where can I see audited financial statements of Renaissance Technologies?

On 22 Nov 2016 Katherine Burton reports: The fabled fund, known for its intense secrecy, has produced about \$US55 billion (\$74.5 billion) in profit over the past 28 years, according to data ...
David Addison's user avatar
2 votes

Thoughts on how quantitative hedge funds use machine learning to invest in the stock market (algorithms, examples of data, etc.)

This may not directly answer your questions. There's a class offered by Georgia Tech called Machine Learning for Trading, you might find it useful. https://www.udacity.com/course/machine-learning-for-...
Hao's user avatar
  • 313
2 votes

Measuring correlation between random variables when they are not normally distributed?

You can use rank correlation in lieu of Pearson correlation to remove that linearity basis. And if tail dependence is of particular interest, one way to look at it is using a t-copula and check the ...
xiaomy's user avatar
  • 121
2 votes
Accepted

Measuring correlation between random variables when they are not normally distributed?

You should probably look into Poon, Rockinger and Tawn (2003). In particular check how they build the $\chi$ and $\bar{\chi}$ measures of correlation which account for extreme events in up or down ...
phdstudent's user avatar
  • 8,143
2 votes

Reference material (EV/ betting game questions) for Quant Hedge Funds Interviews

Here is a list of books I have and like: Pretty much every puzzle style question I got in any interviews I'd seen before, essentially from reading books like these. puzzlegrams, pentagram Simpler ...
will's user avatar
  • 2,561
2 votes

Do passive ETF fund managers care about profolio metric such sharpe ratios and sortino ratio?

Passive ETF Performance Metrics: Tracking Error % of days closing price substantially above NAV % of days closing price substantially below NAV Liquidity Median bid/ask spread based on NBBO (...
Sergei Rodionov's user avatar
2 votes

How do funds assess fees to investors?

From a managed fund operation perspective, the 2% charge is on how much funds one investor controls not the total FUM of the fund.
user84893's user avatar
2 votes

How do funds assess fees to investors?

In fund accounting, it each hedged position you open as an asset & liability that has to be netted off. Management and Performance Fees are incured will be based on the AUM after netting off all ...
JoshZ's user avatar
  • 121
2 votes
Accepted

How do funds assess fees to investors?

Management fees are commonly charged on the asset base, in this case, the 10MM. There might be exceptions to this rule, but they are rare. FOr mutual funds, management fees are typically charged on a ...
Nilsson Hedge's user avatar
1 vote

(Yearly) Hedge Fund alpha

Non-Specific, Meta-answer: When I build something and it doesn't work I try to simplify the problem. In this case, first, work on just estimating the market exposure and alpha net of that market ...
RWP - Down by the Bay's user avatar
1 vote

Multi Factor rolling beta

That's certainly the theory. But you very quickly run into massive multicollinearity issues trying to unpick between stock, bond, currency and commodity risk on a 30-day (in fact 21) window. The betas ...
demully's user avatar
  • 5,071
1 vote
Accepted

Looking for a paper related to tail risk of hedge funds and its decomposition

I recommend you to read a quite current paper in the Journal of Financial Economics which mainly covers the analysis of tail risks (and references to papers which focus on its decomposition): Agarwal/...
skoestlmeier's user avatar
  • 2,916
1 vote
Accepted

Long short equity hedge fund question

1) You didn't specify whether you're interested in ex post or ex ante risk analysis. But in either case, beta / correlation to the relevant stock market index is really important for long/short ...
Frank Fingerman's user avatar
1 vote
Accepted

Multi-factor models on equity long-short hedge funds

Take a look at the Quantopian Risk Model whitepaper. It goes over implementation details of the multi-factor risk model used by Quantopian to analyze long-short equity strategies. The QRM includes 11 ...
ernestoeperez88's user avatar

Only top scored, non community-wiki answers of a minimum length are eligible