Two Centuries Investments
4:00 PM Building a unique, fully quant-driven strategy on fundamental principles: Lessons learned, pitfalls to avoid
- Great quant models are built based on a deep, refined and experience-driven understanding of some processes in asset pricing.
- There are many such in-depth fundamental investment philosophies that can provide robust frameworks for great quant models.
- Most important benefits of a fundamental framework are the insightful questions it poses. Quants with data and computing tools are great at answering questions, but not at articulating them.
- Example: Dynamic Contextual Alpha Model based on a Fundamental Investment Philosophy.
- Other potential examples: Industry Models, Stock Specific Models, Macro Sensitivities on Stocks.
- Things that don't work: Making fundamental analysts do quant things like rank stocks. Making quant models do fundamental things, like screen a small group of stocks for fundamental analysts to pick from; Quants using 'of the shelf' 'academically tested' 'fundamental' approaches. Fundamentals using 'textbook' security analysis. Alpha comes from innovation, uniqueness in style, refined and customized competitive edge in the investing process.