Black Box Trading: Panacea or Promotion?
| Nov 27th, 2006 | Filed under: Hedge Fund Industry Trends | By: Alpha Male |
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By: Roger Ehrenberg
Published: November 26, 2006
Blogger Roger Ehrenberg is somewhat skeptical of the proliferation of quantitative trading strategies. He posts his thoughts on Sunday’s New York Times piece in which MIT’s Andrew Lo described the current interest in quant strategies as a black box “arms race”. Ehrenberg poses an interesting hypothesis:
“I wonder if this new-found emphasis on black box trading will, over time, drive alpha back towards the fundamental bottoms-up strategies…Capital tends to flow from the “cold” strategies to the “hot” strategies, which naturally causes hot strategies to become cold and vice versa.”
