Uncategorized

Humans and Machines Both Reign Supreme: Takeaways from the Battle of the Quants

close

Email a Friend

As markets gyrate, investors continuously hear two diverging voices in their heads.

Matt Dillon (voice of Confidence): Yo, Johnny.  My strategy rocks and I’m in it for the long hall.  I’ve looked over my allocations and they make sense.  I mean, I know what I’m doing here and everything is under control.

Woody Allen (voice of Self-Doubt):  When I began implementing my strategy, I was sure.  Oh, was I sure.  But now?  I dunno.  Am I headed in the right direction? Is volatility too much for me?

Well, the investing kings of the universe also suffer from these opposing forces.  Put differently, quants need to balance the confidence needed to put millions of dollars behind an algorithm they’ve designed and think works versus the fear that if things hit the fan, they’re just a congressional meeting away from notoriety.

Luis Lovas had a great article recounting a meeting that occurred last week, The Battle of the Quants.

The afternoon’s main battle was a panel that pitted a quant team dedicated to automated algorithms against a team that (presumably) considers human discretionary decision making as a better tool for alpha. In other words, like the Jeopardy challenge of IBM’s Watson, it was human vs. machine. That particular event I was completely fascinated by.  An interesting pre-game commentary relates the Jeopardy match to the Singularity by author Ray Kurzwell, a convergence of human and machines.  In the battle pitting algo’s against humans the outcome was decided by an audience vote.  The voting was not simply two choices: “for the machines” or “for humans”, but a third choice was offered more aligned with Ray Kurzwell’s Singularity – “a combination of human and machine decision making”.  As you might have guessed, that third choice was the overwhelming favorite. I believe the majority have the confidence to let machines decide many things but are wanting of human intuition or that proverbial finger on the button as a measure of risk control so fear does not overwhelm.

Kinda like me flying in an airplane.  I know the technology has been good enough for decades to replace a human pilot.  But I’m happy that someone is sitting there.  Just in case.

And hopefully it’s Sully.

And hopefully the pilot is sober.

Source

Confidence and Fear: Why Quantitative Models Win (High Frequency Traders)

0 comments on “Humans and Machines Both Reign Supreme: Takeaways from the Battle of the Quants”

Events, Uncategorized

New speakers announced for Tearsheet’s Resilience Conference

  • The Resilience Conference will celebrate the people, teams and companies successfully navigating through this crisis.
  • 3 new speakers have just been announced.
Tearsheet Editors | June 25, 2020
The Customer Effect, Uncategorized

Inside Yielders, the UK’s first regulatory compliant Islamic crowdfunding platform

  • Yielders, an equity-based crowdfunding platform for real estate, is the first Shariah-compliant financial technology company to get regulatory approval in the U.K.
  • The platform's user base is 35 percent non-Muslim, some of whom may be attracted to the ethical investing principles.
Suman Bhattacharyya | May 18, 2017
Sponsored, Uncategorized

FinTech is changing your life, and you don’t even know it

Brandeis University | May 01, 2017
Uncategorized

FinTech Week: By the numbers

  • Empire Startups' inaugural FinTech Week begins today in New York
  • In preparation for 25 forthcoming events over four days, here's a breakdown by the numbers.
Tanaya Macheel | April 24, 2017
Uncategorized

Hi 5! The top five fintech stories we’re following today

  • Retailers may be looking into the future as opposed to implementing for today.
  • Banks are working to get more people comfortable using mobile apps.
Zack Miller | February 06, 2017
More Articles