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Martin - here is an interesting article on how the big hedge fund
companies hire Quants and where they come from. Should you not go
all the way to the end, let me say that these are the cream of the
crop math genii, they go through a very competitive interview and
hiring process and the lucky few bag salaries at a base $250K level
and dbl up with bonus.. These hedge fund companies deliver an
extraordinary performance level for their clients; see below.
Quants:
Here's an interesting article that was published in businessweek
magazine in August 2006 /James_Harris_Simons the former math
professor who founded the $12 billion quantitative shop <a
href="http://www.rentec.com"; target="_blank">Renaissance
Technologies Corp., pocketed an estimated $1.5 billion last year.
That was thanks to the 5% in fees and nearly 44% of profits that
Renaissance docks its investors (vs. traditional hedge funds'
typical "2 and 20"). Clients don't complain; Renaissance's leading
fund has returned 35%, after fees, since 1989. And D.E. Shaw &
Corp, the brainchild of ex-Columbia University computer science
professor David E. Shaw, with $23 billion in capital, has netted
investors 21% a year for 17 years, without a single losing 12-month
stretch.
Landing a job at either of these shops can be insanely lucrative --
and even more insanely competitive. "Using a self-consciously
obnoxious term, we're looking for <strong>superstars</strong>, the
kinds of people who would be extraordinarily good at nearly
anything," says Nicholas P. Gianakouros, head of global recruiting
for New York-based D.E. Shaw. He is being euphemistic. The handful
of quant and programming geniuses who get into the toughest
mathematics, physics, and computer science PhD programs on the
planet are already best in class. So screening for the 5 or
ten very best of that best means establishing a whole new set of
prerequisites. "The quant shops are a different animal," says Alison
Seanor, vice-president at <a href="http://www.glocap.com/";
target="_blank">Glocap Search</a>, a Manhattan hedge-fund recruiter.
What is the "it" factor that distinguishes the crème de la crème?
All Seanor will say is, "I know it when I see it.
One obvious filter is that liberal arts students -- or even
bankers and stock jockeys -- need not apply. What you will need is a
nosebleed grade-point average in applied mathematics, physics, or
computer science at an elite school like the Massachusetts Institute
of Technology, California Institute of Technology, or Indian
Institutes of Technology. Many of these students are published and
have won high math honors such as the Lowell_Putnam_Mathematical
_Competition", Putnam Fellowship. Often, their
names are already so well known in the field that the quant funds
make the first approach. Another must-have: an <strong>800 math
SAT</strong> score (even if you sat for that exam in your awkward
adolescence). Although the funds diplomatically claim the number
is "just another data point," it's pretty well understood to be a
critical credential.
The quant shops want malleable intellect untainted by Wall Street
dogma -- i.e., not "buy, sell, or hold" types. "They're not really
looking to make money on corporate events like takeovers," says
Emanuel Derman, director of the financial engineering program at
Columbia University and head of risk for quant house Prisma Capital
Markets. "They're looking to make money on mathematical models." Top
funds often advertise in esoteric scientific journals. "You'll not
likely find our ads in a dentist's waiting room," says D.E. Shaw's
Gianakouros.
If yours is one of the lucky 1% to 3% of résumés to survive an
exhaustive initial culling, you can look forward to an hour-long
phone interview peppered with thought problems and brain teasers.
Pass that test and you will then be summoned as many as three times
to undergo up to a dozen grueling interviews. "Every interviewer
uses a different approach," says Gianakouros, citing programming
problems and math proofs. Expect to be asked to build an intricate
Excel model on the spot. Whatever the case, advises Derman, "don't
say anything unless you're ready to be quizzed on it." The firm will
then solicit references for areas in which a candidate may appear
weak. Ultimately, it takes a consensus among everyone who has met
the candidate to extend a coveted offer. D.E. Shaw says that out of
every 500 candidates who got the initial callback, only one makes
the final cut. Many agree it's even harder to get into secretive
Renaissance, which would not comment for this story. A typical
offer, say sources, starts with a base salary of around $250,000,
plus a guaranteed annual bonus that could double that. The best can
command a cut of a fund's upside -- beaucoup bucks when you consider
the multibillion-dollar asset pots. All this, yet, says
Seanor, "most of these guys have never even had a real job.
--- In equismetastock@xxxxxxxxxxxxxxx, <martinb@xxx> wrote:
>
> what is a quant?
>
> Martin Blain
> <http://www.saddleworx.com/> http://www.saddleworx.com
> <http://www.martinblain.com/> http://www.martinblain.com
>
>
> _____
>
> From: equismetastock@xxxxxxxxxxxxxxx
[mailto:equismetastock@xxxxxxxxxxxxxxx]
> On Behalf Of pumrysh
> Sent: Friday, January 26, 2007 11:49 PM
> To: equismetastock@xxxxxxxxxxxxxxx
> Subject: [EquisMetaStock Group] Re: Technical vs. Fundamental
Analysis
>
>
>
> Super,
>
> As always, appreciate the input!
>
> Preston
>
> --- In equismetastock@ <mailto:equismetastock%40yahoogroups.com>
> yahoogroups.com, superfragalist <no_reply@>
> wrote:
> >
> > Unfortunately, Preston, the thinking in this excerpt, while
> exactly on
> > the money, is almost totally disregarded by newbie's. It's not
> > promoted by the guru's because this kind of thinking goes
against
> the
> > get rich quick mentality that helps sell their books, services
and
> > systems.
> >
> > As many of the articles in Roy's newsletter have pointed out, if
> the
> > universe of stocks is rigorously screened with fundamentals and
> quants
> > prior to applying TA, finding a method of trading from that
group
> is
> > infinitely easier, much more profitable and substantially more
> > consistent than screening stocks based on TA.
> >
> > I just did a series of systems tests on Value Line data back to
> 1998.
> > (Thank you very much, Cameron, for assisting with the data. I
hope
> you
> > got the material I sent to you.) The tests were based on using
two
> > methods of trading the list of stocks. The first method was a
> simple
> > trend system based on a pre-trend signal and then the making a
new
> > highs within 30 days of the pre-trend signal. The second method
of
> > trading was simply taking stocks that had been placed on the list
> > sometime during the year, but that were in an extended pullback
of
> > several weeks. Trades were based on the stock having been in the
> > pullback period a set amount of time and then breaking out of the
> > pullback based on a couple of basic trend indicators.
> >
> > Half of the capital account was dedicated to each method. For
the
> nine
> > years of the test 1998 to 2006, the average return was 15.8%.
The
> std
> > dev was only 7.9% with an average of around 50% winning trades
and
> > drawdowns of less than 3%. This is amazing consistency for a
> > mechanical system, especially when the roller coaster time frame
is
> > taken into consideration.
> >
> > During the nine year period from 1998 to 2006 none of the years
had
> > negative returns. Even in 2000, which was brutal to most traders
> who
> > thought they had the whole thing wired based on their 1998 and
1999
> > returns, this combined system made 6.5%.
> >
> > Newbie's want to hear that a system is going to make them 80%,
> 100% or
> > more per year. They don't care about making money consistently,
> just
> > the huge year returns because that's the vision of sugar plums.
> > Unfortunately, it's also a fairy tail.
> >
> > One benchmark I use is to compare private money manager returns
to
> my
> > own systems. I look at futures traders, equity traders and bond
> > traders. Annual return is not the only number that matters. I
want
> to
> > see the volatility and the consistency in their methods.
> >
> > This system returned an average of 16.4% over the last 5 years
> with a
> > std dev of 9.4%. Comparing that to the pro's returns as I've
> > described, those returns would have made any of them very popular
> > money managers, especially when they didn't lose any money in
> 2002.
> >
> > Based on my experience with this type of trading, my actual
returns
> > beat the mechanical test returns fairly easily. By looking at the
> > charts, it is obvious when a buy signal is present but the chart
> still
> > looks weak. The application of discretionary logic in this case
is
> > easy and works very well to improve the system performance.
> >
> > There will be many readers of this post who will scoff at those
> > returns. No problem. I know what the last nine years have been
like
> > and I know the value of consistency.
> >
> > Some readers of your forum will ask me to post the system, etc.
I'm
> > not going to do that. If there is enough interest in how this
> simple
> > but effective system works, send Roy an email asking him to run
the
> > test results and discussion as an article in MSTT, and I may
take
> the
> > time to write it up, if there is enough interest.
> >
> > The main point of this message was basically to add some numbers
to
> > the text of what you had posted.
> >
> > It's too bad so few people will pay attention to what you
> contributed.
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > --- In equismetastock@ <mailto:equismetastock%40yahoogroups.com>
> yahoogroups.com, pumrysh <no_reply@> wrote:
> > >
> > > The Trend Rider:
> > > Technical vs. Fundamental Analysis
> > > Chris Rowe
> > >
> > >
> > > When we analyze a company, we use fundamental analysis. When
we
> > > analyze a stock, we use technical analysis.
> > >
> > > A "trader," is more likely to use technical analysis because
it
> is
> > > known to more accurately assist in predicting the short term
> moves
> > > of a stock.
> > >
> > > A long term "investor" is more likely to use fundamental
> analysis
> > > because it gives a clearer picture of the longer term
potential
> of
> > > the underlying company behind the ticker symbols of a stock.
> Both
> > > forms of analysis are the study of trends and are only as good
> as
> > > the individual who is interpreting them.
> > >
> > > While you can closely follow and profit from current market
> trends,
> > > fundamental analysis is equally as important as technical
> analysis.
> > > For instance, I'll go long on a stock when I see that the
bulls
> are
> > > in control, and the volume is moving higher with the price of
> the
> > > stock, but I position myself in the companies that have
> fundamental
> > > strength that back up the price movement of the stock.
> > >
> > > The two forms of analysis should act as two partners running a
> > > profitable business. Together, the two are like swordsmen with
> their
> > > backs to each other fighting a large group of enemies. One has
> to
> > > trust that it can rely on the other to protect its back.
> > >
> > > People often lose sight of the fact that there are over 10,000
> > > stocks to choose from when deciding which to trade. It is
> important
> > > not to settle for stocks that don't have the strength that we
> look
> > > for, as long as we have the resources to get the ideas in
front
> of
> > > us that we would even consider trading.
> > >
> > > Having strong criteria on both ends is critical, and if one of
> the
> > > two is telling you that there is a red flag or a warning sign
to
> > > watch out for, you should have no problem with dropping a
stock
> that
> > > you believe is suspect. Consider stocks that have strong
> > > fundamentals AND technical indicators, pitches that are thrown
> > > directly over the plate.
> > >
> > > Let's compare the difference between the two:
> > >
> > > Investors typically use fundamental analysis to calculate what
a
> > > company's stock price should be doing. Traders typically use
> > > technical analysis to draw conclusions as to what a stock will
> do
> > > based on what the stock is currently doing. Fundamental
> analysis
> > > takes a much more in-depth look at a company and the industry
> that
> > > it is in. A fundamental analyst must have much more intimate
> > > knowledge of an industry and of the story behind the
underlying
> > > company.
> > >
> > > Whether this is an advantage or a disadvantage is up for
debate
> and
> > > has been for ages. The idea is that a fundamental analyst
> spends a
> > > great deal of time "unwinding" a company's financials to get a
> clear
> > > picture of where the company currently stands.
> > >
> > > The fundamental analyst must first study all of the important
> > > relevant factors that already exist. The next step in
> fundamental
> > > analysis is to study the anticipated changes in the company,
the
> > > industry, and the overall economy to try to clarify the
picture
> of
> > > what will happen in the future.
> > >
> > > Technical analysis is more superficial and is done mainly on
the
> > > notion that the story of the company is reflected on the stock
> > > chart.
> > >
> > > While the fundamental analyst studies the existing public
> > > financials, the technician believes that if a company is
poised
> to
> > > take off, someone out there already knows it and is already
> acting
> > > on it. When a large fund starts to act on knowledge of a
> company,
> > > whether it be public or not, they tend to attempt to acquire a
> large
> > > number of shares without making it very obvious that they know
> > > something of value.
> > >
> > > This is nearly an impossible task. The public record that the
> > > technician studies is the chart, because everything that
> happens,
> > > such as price movement as well as size of the trades, is
> recorded.
> > > Since technical analysis is geared for traders as opposed to
> > > investors, it is used to act swiftly without taking as much
time
> as
> > > fundamental analysis. So, the benefit for the technicians is
> that
> > > they have one step to take. It's a much faster form of
analysis
> > > that gives them the edge that they need to act quickly. Their
> main
> > > advantage is that they don't have to forecast their indicators
> like
> > > fundamentalists do. For a technician, the indicators are the
> > > forecast.
> > >
> > > Both fundamental and technical analysis is helpful in painting
a
> > > more complete picture. The two should be used to complement
one
> > > another instead of versus one another. You can find red flags
> > > telling you to get out of a stock before the rest of the herd
by
> > > using both forms of analysis.
> > >
> > > Using fundamental analysis, several warning signs can be found
> in
> > > the financials if you look closely enough. Sometimes they are
> > > warning signs that sophisticated investors will have an easier
> time
> > > seeing, and other times the signs are more obvious to the
> layman,
> > > such as a company that is taking on way too much debt.
> > >
> > > Using Technical analysis however, is a good way to spot red
> flags
> > > that a stock might trade lower, based on news that has not yet
> been
> > > made public. Let's face it; the stock market is not always
fair.
> > > Oftentimes, someone knows something that will have a huge
impact
> on
> > > the price of a stock before the rest of the world knows about
> it.
> > > This is where technical analysis can really give you the edge
> that
> > > you need to save yourself from a loss.
> > >
> > > It is for these reasons that we make sure that we use both
forms
> of
> > > analysis when investing our hard-earned money. On the
> fundamental
> > > side, we put in hours, days, weeks, or months of research
before
> > > buying or selling a stock. But technically, sometimes we see
> > > warning signs that tell us to sell for our protection. You
> worked
> > > hard to get the money in the bank and then transferred into
your
> > > stock account. You should work just as hard, if not harder, to
> keep
> > > it there.
> > >
> >
>
>
>
>
>
>
> [Non-text portions of this message have been removed]
>
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